RIYADH: Oil prices continued to rise for the seventh week in a row, and made another weekly gain that will make the Brent crude price settle above the important $50 mark by the end of the year. West Texas Intermediate (WTI) is following this upward momentum and might breach the $50 barrier before the year-end. On the week closing, Brent crude rose to $52.26 per barrel and WTI crude moved up to $49.10 per barrel.
By the week closing, oil prices rose to a nine-month high. If oil prices continue to rise next week ahead of the holiday, this will be a complete two months of upward tendency. Optimism on vaccinations is outpacing bearish market developments: The production increase by the Organization of the Petroleum Exporting Countries (driven by Libya), the increase in supplies from Norway, the US crude oil rig count continuing to rise, and US gasoline stocks hitting a 16-week high as the pandemic stunts demand and lockdowns continue to be extended in Europe.
Intuitively, the recent oil price gains may be a bit premature, as a global recovery in oil demand is unlikely to take place before the second quarter of 2021. If the coronavirus vaccine rollouts become widespread, with successful execution, this will be a healthy start for 2021, where market sentiment will continue to drive oil prices higher despite the unchanged fundamentals and lockdowns continuing to weigh on oil demand.
However, it is still too premature to know what the vaccine rollouts will have on global aviation, and what impact the sector will have on oil demand. On the other hand, rising consumption in Asia and optimism over vaccines may help oil prices to stay in the range of $50-$55 per barrel for Brent crude until the first quarter of 2021.
China crude oil imports in October fell month-on-month by 1.78 million barrels per day (bpd) to 10.05 million bpd, the second year-on-year decline in 2020. This is because China continues to destock floating storage, which is about to reach the pre-pandemic low level.
The US Energy Information Administration reported a crude oil inventory decline of 3.1 million barrels. The US dollar plunged to a year-and-a half-low against other major currencies. Oil prices generally rise when the dollar falls because crude prices in dollars become cheaper for buyers holding other currencies.