InvestorQ : Why have crude oil prices in the world market moving up so sharply in the last few weeks? Do you see it going higher?
Dilmini Mercia made post

Why have crude oil prices in the world market moving up so sharply in the last few weeks? Do you see it going higher?

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Dawn Cherian answered.
3 months ago
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Actually, there are a number of reasons that have pushed crude prices higher. In the last 2 months, Brent Crude has moved from $36/bbl to $56/bbl; a spike of nearly 55% in crude prices in a short span of time. Here are some of the key drivers of higher crude prices.

· The first big trigger has been the vaccine discovery. It is not expected that the vaccine could lead to better growth hopes and hence consumption and spending may start picking indirectly giving a boost to oil demand.

· In addition, the pent up demand for oil could see a sharp front-ending of oil demand and that could also benefit oil in the short run. These are some very demand driven factors that are driving the markets higher.

· OPEC is gradually losing its clout as the swing oil producer. That mantle has been taken over by the US. Saudi Arabia is now the third largest producer of oil in the world after the US and Russia. It is keen to establish its hegemony once again.

· As a result, with increasing indications of ruptures within the OPEC+ alliance, Saudi Arabia has taken the initiative to volunteer an additional 1 million bpd supply cut from its side so that other countries don’t have to take bigger cuts. That helped oil prices.

· Don’t forget that US shifts have also been favorable for oil. The US stockpiles of crude fell sharply hinting at a surge in demand for oil. That gave a boost to oil prices as it means that the pressure on storage of oil would also reduce.

· Lastly, Biden’s election to the US presidency spells trouble for oil supply as Biden is known to be anti-fracking on Federal lands. This is unlike the Trump era when businesses had a free hand in fracking. Biden would mean more cuts in US supply too.

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