Oil Price Is Surging To a New Level
Since the outbreak of the COVID-19, the financial market has taken a lot of unprecedented hits. One of the worst ones was the hit of the U.S. oil trading, which collapsed. Companies like West Texas crude fell to minus $37.63 a barrel.
Fortunately, oil has risen steadily since late last year as COVID-19 vaccines began to be produced. Something that has also helped is the supply curbs from OPEC and its allies' which spur hopes that global stockpiles will continue to accelerate. These things are great news for the economy as it has pushed oil prices back to a stable spot.
West Texas Intermediate futures increased 2.4%, while the global Brent benchmark came back within sight of $60. Oil rose toward $55 a barrel in New York, reaching its highest level in a year as the virus-recovery rally advanced. The physical market has also shown strength these past weeks.
Royal Dutch Shell Plc plundered the North Sea market, buying the most benchmark-grade loads in a day in 10 years in the S&P Global Platts pricing window. The oil giant also requested a further seven shipments, quite the increase! Despite this, there is still scepticism over this new high.
Since a full-fledged trade recovery yet to take form, futures contracts may have surged too far too fast, especially with critical indicators showing crude is in overbought territory. The world's largest independent oil merchant, Vitol SA, and rival Gunvor Group Ltd. expressed discretion over the recent rally.
Mike Muller, the head of Vitol's Asian operations, said the market is getting ahead of itself in terms of a post-vaccine euphoria. Gunvor Chief Executive Officer Torbjorn Tornqvist said that gains beyond $60 a barrel are unlikely because that would prompt energy companies to ramp up production.
Will Oil Price Continue to Climb?
With new COVID-19 varients surfacing, which inevitably lead to more lockdowns, and vaccine rollouts are more delayed than expected, oil still faces bumpy short-term demand. Still, with cold weather sweeping across the U.S. and much of Wall Street's forecasting inventory draws in the coming months, prices continue to surge higher.
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