Brent oil price breaches $60
Oil advanced above $60 a barrel for this first time in more than a year as global supplies tighten and the demand outlook improves with the rollout of Covid-19 vaccines.
Futures in London gained as much as 1.2% before easing slightly on Monday, extending its rally after a third weekly gain. A year after the pandemic kept millions home, grounding planes and devastating fuel demand, a rebound in consumption along with output curbs is leading to a rapid tightening of markets. Timespreads for the global benchmark Brent have been firmly in a backwardation structure, indicating bullishness.
Meanwhile, the number of vessels sailing toward China jumped to a six-month high on Friday, signaling robust demand from the world’s biggest importer. Despite the positive indicators, top independent traders Vitol SA and Gunvor Group Ltd. have expressed caution about the recent surge in prices and one technical indicator is showing that oil is overbought, Bloomberg reported.
Oil has rallied since the end of October amid Covid-19 vaccine breakthroughs and after Saudi Arabia pledged to deepen output cuts. OPEC+ has vowed to quickly clear the surplus left behind by the pandemic, but there are still concerns about near-term demand, with a new virus variant spreading in the U.S. and other regions across the world grappling with lockdowns.
Chinese demand continues to be a driver for the market, despite concerns about a recent virus resurgence. As of Friday, 127 supertankers were heading toward the country, which if fully laden, would deliver in excess of 250 million barrels.