InvestorQ : Why has crude oil suddenly started soaring fast and high?
diksha shah made post

Why has crude oil suddenly started soaring fast and high?

2 years ago

Crude oil has had a tough time since the beginning of the COVID pandemic. Between January and April, the price of Crude more than halved to as low as $20/bbl. From there the price has rallied, although the real rally happened in the last one month.

On 25 November, Crude oil touched a 6-month high of $48.50/bbl in the North Sea Brent market. Even the US WTI was edging closer to $45/bbl. The oil prices have rallied by over 30% in the last one month from $36/bbl to the current levels.

The rally has been driven by the election of Biden as he is believed to be averse to fracking on Federal lands. That could constrain supply of oil in a big way and boost crude prices globally. US shale had been one of the big swing factors in oil supply.

Another factor is the progress on the COVID vaccine, with the top 3 candidates showing a lot of promise coupled with high efficacy in excess of 93%. The vaccine may finally see the light of day by mid-2021 and that is also likely to drive revival in demand across the board.

For over 1 year, weak demand due to the COVID pandemic was the biggest challenge keeping oil prices low. The vaccine paves the way for a turnaround in demand and therefore better oil price realization. That is what is pushing oil higher.