Oil prices on Monday jumped to their highest level in 13 months with increasing hopes of a speedier oil demand recovery, with rising tensions in the Middle East and optimism over the $1.9 trillion US stimulus check.
International benchmark Brent crude was trading at $63.51 per barrel at 0702 GMT with a 1.72% increase after closing Friday at $62.43 a barrel. This is the highest price since Jan. 22 when it was trading at $64.58.
Reaching its highest level since Jan. 8 when it traded at $65.65, American benchmark West Texas Intermediate (WTI) increased by 2.15% to $60.75 per barrel at the same time relative to end-of-day trading at $59.47 a barrel during the previous session.
Oil prices have long been supported by vaccine developments in the hope of a demand rebound. Saudi Arabia’s massive production cut pledge on the back of OPEC+ cuts offers a further stimulus to exert upward oil price pressure as investors hope for a drawdown in the supply glut due to the pandemic.
"After last week’s high oil prices ending close to $63 per barrel for Brent and $60 for WTI, everyone seems happy with these current levels, hoping for more optimistic prices and oil markets in general," Jose Chalhoub, political risk and oil analyst, told Anadolu Agency, noting declining inventories and both the coordination and cohesion of OPEC+ in maintaining production cuts led by Saudi Arabia.
"Ultimately this upward trend and the current euphoric mood will run parallel with the massive vaccination campaigns in the US, Europe and other spots," Chalhoub said.
He noted that the length of the ongoing lockdowns, seasonal factors and geopolitical risks would continue to determine oil demand and how soon it will pick up to pre-pandemic levels, which, Chalhoub thinks, is not possible until the second quarter of 2021.
Optimism over the positive developments on the expected $1.9 stimulus check in the US, the world’s largest oil consumer, also buoyed oil prices.
The plan includes $1,400 for individuals earning up to $75,000 per year and their dependents, with the provision of $2,800 for married couples earning up to $150,000. A family of four that meets all requirements would receive $5,600.
Last week, House Speaker Nancy Pelosi said the goal is to have the legislation "on the president's desk" for Joe Biden to sign into law by March 14.
Geopolitical risks also contributed to the upward oil price trend after the Saudi-led coalition in Yemen said Saturday it had intercepted a drone fired by Houthi rebels towards the Abha airport in southwestern Saudi Arabia.