Crude oil price is back on its course to recovery after Tuesday’s plunge. Challenges surrounding vaccine rollouts, increasing coronavirus cases, and rising US oil inventories have been drivers to the decline.
Crude Oil Price on Recovery
Crude oil price extended its gains from Wednesday’s session after the plunge on Tuesday. WTI futures were up by 5.96% at $60.79. Brent futures also rose by 0.13% to 63.54. In early March, the commodity hit the $68 mark, its highest level since October 2018. Since then, the commodity has been on a decline to a one-month low of $57.31 earlier on Wednesday’s session.
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However, the subsequent rise in price is an indication that the movements in recent sessions have been a corrective pullback rather than a bearish reversal. Investors looking to trade oil entered the new year with high hopes for the recovery of global oil demand.
Production cuts by OPEC+, the $1.9 trillion US stimulus package, and vaccine rollout fuelled the uptrend. Within the first two months of the year, crude oil price had risen by about 29%. However, last week’s plunge was a sign that the prices had surged abnormally fast.
While the current rise is an indication that the recovery for oil demand is still on, it has a long way to go. The third wave of coronavirus in Europe and subsequent lockdowns in France, Germany, Italy, and the Netherlands has created a hurdle for oil demand. This has come during the summer holiday season, which was set to heighten oil demand. Challenges surrounding the AstraZeneca vaccine have not made it any easier for crude oil price.
Besides, oil prices are finding resistance from the surprise rise in US inventories. On Wednesday, EIA’s data indicated that crude oil inventories had surged by 1.912 million barrels, compared to the forecasted draw of 272,000 barrels. Gasoline inventories jumped by 203,000 barrels against the expected rise of 1.186 million barrels.
The existing hurdles to the recovery of oil price justify the decision by OPEC+ to continue its production cuts into April. Saudi Arabia has been vocal on the coalition’s need to be cautious about increasing production too quickly. The recent price swings are proof that that the group should heed to that advice.
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