Brent Oil Recovers to $50 After 9 Months... Rising 'Expectations for Economic Recovery'

Expectations Grow for Crude Oil Demand Recovery with COVID-19 Vaccination
Overcoming Challenges Such as Rising U.S. Crude Oil Inventories

[Asia Economy Reporter Naju-seok] Brent crude oil, the international benchmark for oil prices, has recovered to $50 per barrel for the first time in nine months. Expectations have grown that crude oil demand will rapidly increase as COVID-19 vaccinations begin.

On the 10th (local time), Brent crude oil was trading at $50.37 per barrel at 10:15 PM UK time, up 3.09% from the previous trading day. Brent crude, which started the year at $65 per barrel, had plunged sharply to as low as $19 per barrel due to reduced economic activity and decreased oil demand caused by COVID-19.

Recently, Brent crude has been on the rise amid optimism related to COVID-19 vaccines. In particular, news that the United States and Canada will soon begin vaccinations following the UK acted as a positive factor.

Bjørnar Tonhaugen, CEO of Rystad Energy, explained, "With vaccination schedules progressing rapidly, expectations have grown that oil demand will also increase quickly."

Besides demand-side expectations, the fact that supply is being managed stably is also contributing to the rise in oil prices. OPEC+ (the Organization of the Petroleum Exporting Countries (OPEC) member countries and non-OPEC allies) agreed to increase oil production by 500,000 barrels per day next year.

[Image source=Yonhap News]

Currently, OPEC+ is cutting oil production by 7.7 million barrels per day to supply the market, but from early next year, the production cut will be reduced to 7.2 million barrels per day. This decision reflects the increased demand expectations due to vaccines but also takes into account the fact that COVID-19 is still raging in the US and Europe.

Notably, despite negative factors such as a sharp increase in US crude oil inventories contrary to market expectations, oil prices still showed an upward trend. The market initially expected US crude inventories to decrease by 1.4 million barrels, but in reality, they increased by 15 million barrels. This confirmed that the recovery in US crude oil demand is slow.

Additionally, the market analyzed that factors such as China and India increasing crude oil purchases in the first quarter of next year are also contributing to the rise in oil prices.

This content was produced with the assistance of AI translation services.