February was a good month for oil producers with prices rising by nearly 20 per cent following Saudi Arabia’s cut in output.
Brent crude closed slightly off its best level closing at $62 yesterday away from the month high of $67.
However, with the Saudi output cut taking effect, the market for crude is looking increasingly optimistic.
Certainly for the Saudis who are now benefiting from the “surprise” and voluntary cut of 1 million barrels.
Bloomberg says oil surged to the highest in more than a year.
It says the market looks ahead toward an accelerating decline in global inventories and a comeback in demand.
Key players are floating the prospect of $100 crude in the next year or two.
This will bring a boon to the Saudi economy and a bane for the people in countries like Malaysia.
However, the Saudi output cut expires at the end of March while Russia and other producers seem keen to increase production to gain the benefit of rising prices.
The Oxford Business Group says oil prices have soared by 75% since November and around 26% this year.
In mid-February, OPEC forecast full-year oil demand to increase by 5.8m bpd compared to 2020 levels, driven partly by an improving global economic climate and significant stimulus measures from governments around the world.
Oxford Business Group says another factor seen to be supporting the increase in oil prices is the improving economic outlook.
“With the global rollout of various Covid-19 vaccines, it is hoped that the world will return to a degree of normality in 2021 in terms of travel and consumption, an outcome which would further spur demand.”
In late January the IMF forecast oil prices would average $50 a barrel this year, above the 2020 average of $41.30.
The Dutch multinational banking firm ING is predicting an average annual price of $65 per barrel. Goldman Sachs has forecast Brent prices will rise at $75 a barrel in the third quarter.