A view of the flare of the Kaombo Norte, an oil tanker converted into a FPSO vessel (Floating Production Storage and Offloading), owned by the French Total oil company, on November 8, 2018. AFP
The benchmark oil contract Brent North Sea rose above $60 per barrel on February 8 to hit the highest level since the coronavirus pandemic began to spread globally almost a year ago.
Oil prices have recovered owing to the Organisation of the Petroleum Exporting Countries (OPEC) and its allies cutting production after the coronavirus pandemic slashed demand, according to analysts.
SEB Research chief commodities analyst Bjarne Schieldrop noted: “It is worth reminding oneself that OPEC+ is the single most important reason for why the oil price reached $60.
“It is because of large cuts by OPEC+ . . . since May.”
Crude and other assets are winning support also from the prospect of a $1.9 trillion US stimulus package.
European and Asian stock markets also climbed on February 8, while the dollar rose against its main rivals.
Adding to the upbeat mood is data showing new Covid infection rates, with last week seeing the lowest level since October, while governments begin to get to grips with inoculation programmes.
Brent crude hit $60.27 per barrel on February 8, the first time it has exceeded $60 since February last year.
After lockdowns began to spread in March, oil prices dropped off a cliff, with US oil contract WTI even briefly turning negative.
And despite production cuts, oil supplies remain high.
Schieldrop added: “Global oil demand is still hurt badly by the global pandemic.”
Recovery in part relies on US lawmakers approving President Joe Biden’s huge stimulus package that should help the jobs market.
Figures last week showed the US economy created less than half the number of jobs expected last month, which analysts said reinforced the need for a new, big spending bill.
Treasury Secretary Janet Yellen on February 7 warned that the US job market was “stalling” and might not recover for years without support.
But she told CNN that if the spending package was passed, “we would get back to full employment next year”.
Despite the weak jobs reading, all three main indices on Wall Street ended on a positive note on February 5, with the Nasdaq and S&P 500 clocking up new records.
IG trading group senior market analyst Joshua Mahony said: “Markets are continuing last week’s bullish momentum, with Friday’s [February 5] jobs report providing a fresh reminder of the need to push a major stimulus package across the line.”
