By Adedapo Adesanya
Oil rose on Monday as the market tapped into the positive Chinese economic figures and higher vaccination rates in the United States serving as pointers for a strong rebound in demand in the world’s two largest economies.
At the market yesterday, the price of the Brent crude futures closed 80 cents or 1.2 per cent higher at $67.56 per barrel, while the West Texas Intermediate (WTI) crude futures gained 12 cents or 0.9 per cent to trade at $64.61 per barrel.
The United States and China, the world’s top two oil consumers, are expected to drive a recovery in demand for oil as data showed that more than 30 per cent of US residents have been fully vaccinated.
On China’s part, crude imports data averaged a seasonal record in February and March from increased car sales, a recovery in local travel and a strong industrial backdrop.
In addition, the European Union (EU) unveiled a plan to open its borders to vaccinated tourists, giving more hope to the market that economies and oil demand are set for a rebound in the summer months.
By welcoming non-EU travellers for vacations, travel will increase, meaning more need for jet fuel and economies will benefit as people have been waiting for a year to travel quarantine-free and spend money during vacations.
The market, seeing these positive signals, overlooked other depressing news to hold onto a bullish performance in a month that kicks off an additional increase in crude supply.
The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) decided last week to stick to a plan to boost supply slightly from May 1 even as OPEC’s production climbed in April with indications that it will rise further.
The supply cut has helped the oil market recover from a historic low which occurred more than a year ago, plunging oil-dependent economies into a panic.
Despite the improved situation, rising cases in India, the world’s third-largest oil importer, are still being monitored. India on Monday reported more than 300,000 new coronavirus cases for a 12th straight day. The new wave of the virus has already led to a drop in fuel sales in April.
The market is also observing happenings between Iran and world powers as they are set to revive the 2015 nuclear deal that could add to global oil supplies should an agreement be reached.
Iran will be able to raise its crude oil exports to 2.5 million barrels per day after the US sanctions on its oil industry are lifted, adding more oil to the global supply.