Brent Nears $70 as Europe Reopens Economy

By Adedapo Adesanya

The Brent crude sighted the long-awaited $70 per barrel territory on Monday, May 17, lifted by the reopening of the European economy and backed by a rise in demand from the largest consumer of oil, the United States.

During the session, the price of the international benchmark crude futures rose by 86 cents or 1.25 per cent to trade at $69.57 per barrel, while the US benchmark, West Texas Intermediate (WTI) crude futures, rose by 98 cents or 1.5 per cent to sell at $66.35 per barrel.

The day’s positive outcome was spurred by projected economic recovery soon to be witnessed in Europe as Britain reopened, giving 65 million people a measure of freedom after a four-month COVID-19 lockdown.

With accelerating vaccination rates, France and Spain have relaxed COVID-related restrictions while Portugal and the Netherlands eased travel restrictions, which will see an increase in demand for crude.

In the US, passengers at airports jumped to the highest since the pandemic began with airlines reportedly planning months high flights since the pandemic started.

However, surging coronavirus cases in Asia keeps pulling back a full market recovery with India, which has been the major newsmaker relating to oil in the past few weeks, planning to extend lockdowns to fight the pandemic, which has killed more than 270,000 people there.

Another Asian country, Singapore, is preparing to close schools this week and Japan has declared a state of emergency in three more states. Cases have also spiked in Taiwan as the country has imposed its toughest restrictions so far. The authorities are shutting down cinemas and entertainment venues until May 28, while limiting gatherings to five indoors and 10 outdoors.

In addition, underperforming numbers from China may impact the market as data showed that factories slowed their output growth in April and retail sales significantly missed expectations as officials warned of new problems affecting the recovery in the world’s second-largest economy.

China’s crude oil throughput rose 7.5 per cent in April from the same month a year ago but remained off the peak seen in the last quarter of 2020.

Another possible problem that may impact the market in the future is the prospect of more crude flows from Iran as the nation seeks to revive a nuclear deal and free itself of US sanctions. Talks are ongoing, however, and progress on a solution remains uncertain.