Oil prices rose early last Thursday to their highest level in six weeks, thanks to positive data for the US economy and expectations of increased demand from the International Energy Agency and OPEC + and the rebalancing of oil inventories in the United States. Where, Brent crude prices jumped to more than $68 per barrel, and West Texas Intermediate prices approached $65 per barrel, but prices fell the next morning, Friday. Profit taking following strong gains, along with growing fears of the spread of coronavirus in India, likely contributed to the decline. However, markets ended the week on a positive note. Earlier last week, OPEC+ expected oil demand to increase this year by 5.95 million barrels per day. This was an upward revision of 70,000 barrels per day from a previous forecast, and this fact sparked optimism among traders, as did OPEC+’s decision to abandon the ministerial meeting last week and continue production at previously agreed upon rates. At the previous ministerial meeting in early April, OPEC+ decided to gradually return more than one million barrels per day to the markets between May and July. Saudi Arabia will also begin to gradually reverse its voluntary cut of one million barrels per day, starting with a production increase of 250,000 barrels per day this month. At the recent OPEC+ Joint Ministerial Monitoring Committee meeting, OPEC Secretary-General Mohammed Barkindo said: “The oil market continues to reap the benefits of supporting the Declaration of Cooperation Agreement to stabilize the sustainable oil market and provide a platform for global economic recovery,” pointing to “the positive trajectory of the global economy, coupled with stimulus measures, progress in vaccinations and the summer travel season, as driving forces for improving oil demand expectations in the second half of the year.” However, he also stressed that there are many factors that require constant monitoring and vigilance. An upbeat outlook for the global economy has been the driving force behind the recent improvement in oil prices despite continuing headwinds, including rising infection rates and slowing vaccination rates in some parts of the world. Meanwhile, the US Energy Information Administration reported last Wednesday that crude oil inventories were within the five-year average for the season - for the first time in months - and that middle distillate inventories fell by 3.3 million barrels last week. Middle distillates, especially diesel fuel, have been a headache for refiners during the pandemic, with inventories reaching excessive levels due to the slowdown in various activities involving transportation of goods. Now, companies are returning to normal business, according to the data, and demand for diesel is increasing. Recent developments in fuel demand in the US appear to have been enough to outweigh earlier concerns about Indian fuel demand amid a resurgence in infections there. According to what Bloomberg quoted some analysts as saying, there are many positive indicators of a recovery in demand. According to them, the situation in India is clearly going to be a headwind, but given what is happening in the US, it is a completely different story. According to Rystad Energy, “Markets expect a significant recovery in global oil demand from the summer onwards.” “As vaccination campaigns progress and lockdowns begin to be lifted soon in Europe and other recovering economies, the need for road and aviation fuel will increase and the results will be seen.” But despite high vaccination rates in many parts of the world, people appear to still be wary of public transportation, and are choosing personal vehicles, leading to increased demand for crude oil along with metals. Indeed, car sales in Europe rose 63 percent in March to 1.39 million, a high figure not only compared to last year, when sales of everything except detergents and disinfecting equipment fell. The March registration number was the highest monthly number for car sales since June 2019, according to Bloomberg. In general, car sales increased at significant rates in the first quarter of this year. Sales of electric cars, including hybrid cars, also increased strongly, but they accounted for only 15 percent of total quarterly sales. This means that petrol or diesel cars are still the preferred choice for many drivers, hence the good news for oil demand. In fact, optimism appears to be on the rise. Goldman Sachs, which was particularly optimistic about oil prices, stuck to its forecast that Brent crude could reach $80 a barrel in the second half of this year. The investment bank also said in a new report that it expects global oil demand to record its strongest recovery ever during the next six months. According to Goldman Sachs, demand growth at a rate of 5.2 million barrels per day will be the result of accelerating vaccinations in Europe, which in turn will lead to increased demand for travel. This will also increase demand for jet fuel - the hardest-hit part of the fuel industry - to 1.5 million barrels per day, according to the investment bank. If demand and therefore prices continue to rise as expected, it will provide some breathing room for the economies of exporting countries that rely on oil as a main source of income, most of which need Brent crude to trade well above current prices to avoid another budget deficit. The price of $70 per barrel for the most widely traded oil may be high enough for some. However, there are other countries that need oil at $100 per barrel to cover their budget expenses. But at the same time, a recovery in oil demand would undermine calls for a green recovery from the pandemic. In this aspect, the International Energy Agency has already warned that emissions are increasing again after falling last year due to the lockdown. The recovery in demand for oil that is expected by organizations, banks and analysts seems to be evidence that the transition to a transportation sector that depends entirely on electricity, or in which electricity constitutes the largest part of it, may be more difficult and far-fetched than some hope. Economic
