Business News: Oil prices rise to $70 as demand outlook improves.
Despite high vaccination rates in many parts of the world, people still seem to be wary of public transport, opting for personal vehicles, which is increasing the demand for crude oil along with metals. Called “the great car comeback” by Bloomberg, the trend is visible in places as diverse as Tel Aviv, Moscow and Bucharest, according to data. from manufacturer of satellite navigation devices TomTom.
Car sales in Europe increased 63% last month to 1.39 million, a high not only from last year, when sales of everything but hand washing and toilet paper were modest. The March number of registrations was the highest number of monthly car sales since June 2019, Bloomberg noted in a previous report.
“Between planting season and online truck deliveries, you have quite a number in diesel,” said Bob Yawger, director of energy futures at Mizuho, as quoted by Reuters. “The planting season is working wonders for the spirits market.” It appears that the latest developments in US fuel demand have been enough to eclipse previous concerns about Indian fuel demand amid a resurgence of infections.
Indeed, optimism appears to be on the rise. Goldman Sachs, which has been particularly optimistic about oil, has maintained its forecast that Brent could reach $ 80 a barrel in the second half of this year. The investment bank also said in a new statement that it expected global oil demand to record its strongest rebound ever over the next six months.
At 5.2 million barrels a day, according to Goldman, the jump in demand will be the result of accelerating vaccinations in Europe, which in turn would lead to higher travel demand. According to the investment bank, this will also lead to an increase in demand for jet fuel, the most affected segment of the fuel industry, by 1.5 million barrels per day.
If the rally continues as expected, it will provide much needed breathing room for the oil-dependent economies of the Persian Gulf, most of which need Brent to trade much higher than current prices to avoid another budget deficit. A price of $ 70 a barrel of the most traded benchmark may be high enough for some, such as Saudi Arabia. However, others, especially Bahrain, need oil at $ 100 a barrel to make ends meet.
At the same time, however, it would undermine the demands for a green recovery from the pandemic. The IEA has already warned that emissions are on the rise again after last year’s truce due to blockades. The rebound in oil demand that banks and analysts expect seems to be proof that the shift to all-electric transportation could be more challenging than some hopes.