InvestorQ : What does the crude oil crossing $50/bbl indicate?
diksha shah made post

What does the crude oil crossing $50/bbl indicate?

3 years ago

After hovering around the $48-49/bbl mark for some time, Brent Crude finally got beyond the $50/bbl mark. It could be seen as a signal that global demand was finally reviving. In fact, it is interesting to note that the price of Brent Crude crossed $50/bbl for the first time since March 2020; after almost 9 months.

The trigger came from progress on the COVID vaccine front. As countries rolled out the COVID vaccination plans in a more aggressive and systematic manner, the oil prices rose on the hope that eventually this may translate into higher demand for oil. At least the hope is that the oil demand would get back to pre-COVID levels.

Crude oil has surely come out of a big chain of volatility. At the peak of the pandemic in late April 2020, the Brent Crude had dipped below $20/bbl while WTI crude on the NYMEX had even dipped briefly into the negative zone. Of course, the crude prices did bounce from the lower range but the aggressive rally from $36 only happened in the last two months.

The crude price rally has been clearly fuelled by hopes of an economic recovery as well as indications from the OPEC, the cartel that determines supply and price that the supply cuts would continue at around the same levels in 2021 too. Needless to say, higher oil prices are not too encouraging for the Indian economy.