Brent oil started the Asian session breaking the $75 per barrel trading mark over emerging signs of a rapidly tightening market.
Brent oil futures is up 0.28% to $75.11 a barrel, hitting the $75 mark for the first time in more than two years while the U.S oil (WTI) futures is up 0.10% to $73.19.
Brent oil has rallied more than 40% this year as countries such as the U.S, China and Europe continue their economic recoveries from COVID-19 with increased vaccination effort from these countries which is improving the fuel demand outlook.
Also fuelling the bullish market is the Bank of America Corp. forecast that the global crude benchmark could hit the $100 a barrel in 2022, giving credit to a rebound in travel.
However, ongoing COVID-19 outbreaks in several countries are a grim reminder that fuel demand recovery remains uneven. India has had the worst of it, currently experiencing a second wave of covid-19 outbreaks. The spread of the virus is so bad in the region that an outbreak of “Black Fungus” is seen to be on the rise as well.
Another thing investors need to be cautious of is China’s crackdown on its private refiners. The second batch of 2021 crude import quotas allocated to them was about 35% less than 2020, which could impact flows in the sector that accounts for around a quarter of processing capacity in the world’s largest oil importer.
What they are saying
Vanda Insights founder, Vandana Hari told Bloomberg that, “Demand optimism is now well established and a tightening of the market is very much in the spotlight… if there is a pause in this rally, it will likely come from the supply side.”
The overall bullish outlook for oil is adding pressure on the Organization of the Petroleum Exporting Countries and allies (OPEC+) to consider reviving more of the production curbed during COVID-19 when it meets in the following week.
Investors will now focus on the U.S crude oil supply from the American Petroleum Institute, due later in the day and data and crude oil supply data from the U.S Energy Information Administration, due later in the week.
