By Adedapo Adesanya
Crude oil prices maintained positive momentum on Tuesday as the boost from the distribution of vaccines outweighed the demand pressures caused by new lockdowns across Europe.
More countries in Europe and some states in the US are tightening the coronavirus restrictions over Christmas and the new year, which is likely to weigh on demand.
This is happening despite widespread vaccinations in Western Europe and North America. The vaccine development has, however, led to a surge in optimism for the market.
As at last night, the price of the Brent was up by 47 cents or 0.93 per cent to trade at $50.76 per barrel while the West Texas Intermediate (WTI) crude futures moved up by 10 cents or 0.20 per cent to trade at $47.53 per barrel.
The bullish run of oil prices continues to defy the negative trends surrounding the market and the global economy at large.
In its latest forecast on Tuesday, the International Energy Association (IEA) cut its 2021 global oil demand growth projection resulting from travel restrictions and border closures, which it expects to remain in place until COVID-19 vaccines are widely available.
The Paris-based agency noted in its Oil Market Report (OMR) that global oil consumption is expected to increase by 5.69 million barrels per day next year, which is 110,000 barrels per day lower than the growth predicted a month ago.
It now sees 2020 demand falling by 8.82 million barrels per day, which is a 40,000-barrel per day lower than forecast in the previous report.
In addition, the IEA sees potential for global production to edge higher this month, even before the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) increases its collective quota by 500,000 barrels per day in January.
Global supply rose by 1.5 million barrels per day in November to 92.7 million barrels per day as the US recovered from hurricane-related shut-ins and Libya’s production increased.
This lends backing to the OPEC report, which was released a day ahead, that showed the group’s oil production had risen for November while adjusting downward its forecast for oil demand.
In the US, the American Petroleum Institute (API) reported on Tuesday a build in crude oil inventories of 1.9 million barrels for the week ending December 11. Analysts had predicted an inventory draw of 1.937 million barrels for the week.
On Wednesday, the Energy Information Administration (EIA) will release a more trusted, accurate data which could sway the market into the bearish territory.
Dipo Olowookere