Oil has hit its highest prices in a year this weekend. Having risen by one per cent on Friday (February 5), hitting its highest in a year, the price closed in on US$60 a barrel.

The rise in oil prices over the past few weeks is due in part to the economic revival in a number of export markets, albeit at a slow pace.

The economic revival is complemented by high hopes of supply curbs by the world’s oil monopoly, the Organisation of Petroleum Exporting Countries (OPEC) and its allies.

Oil prices hit a one-year high

The steady rise in oil prices is also supported by the recovery now taking place in the global equities market in particular in America, where its stock markets hit record highs. This happened upon signs of progress toward more economic stimulus.

In addition, latest labour market news pointed to certain positive developments occurring with confirmation that America’s job market is stabilising.

Brent crude ended the session on Friday going up by 50 cents or 0.9% to close at $59.34. This came after hitting its highest price since February 20, 2020 at $59.79.

US crude settled up 62 cents or 1.1% at $56.85, after reaching $57.29, its highest since January 22 last year. Last week, US crude futures gained about 9% week, the biggest percentage gain since October 2020.

This steep rise was due in part due to US inventories last week dropping to levels last seen in March. Brent crude rose about 6% last week, which was good news for the OPEC.

Oil analysts say the general expectation is that brent crude is looking to close in at $60 now that OPEC has successfully eased most supply side concerns. This came amid optimism that the world is slowly overcoming COVID 19.

Edward Moya, senior market analyst at OANDA in New York reported that
“the fundamentals remain solid for crude, but a consolidation seems likely given the recent runup.”

The last time Brent traded at $60 a barrel, COVID 19 had yet to take hold, economies were open and demand for fuel was much higher.

Optimism of demand driven by roll-out of COVID vaccines

The rollout of COVID-19 vaccines across the globe has fed hopes of demand growth. This anticipation of further growth in demand is being fuelled by optimism by OPEC, which expects a market deficit throughout 2021.

However, OPEC is not expecting oil consumption to return to pre-pandemic levels until 2022. “What is really helping the market today, and is a more valid reason for the price rise we see, once again comes from Saudi Arabia and its top firm, Aramco,” reported Rystad Energy’s head of oil markets Bjornar Tonhaugen.

Aramco raised its Arab Light official selling price to Northwest Europe for March by $1.40 a barrel from the previous month. This could be a signal that Saudi Arabia is more confident in the demand outlook, causing its bullish sentiment towards better prices for oil producing nations.

On Wednesday, at their meeting, OPEC and allies stuck to their supply tightening policy. Last year, OPEC cut output, which has helped lift prices from historic lows last year.

Oil production in 2020 tumbled by 6.4%.