On Wednesday (November 25), the global oil prices reached their highest level since early March 2020, owing to an improved global economic outlook and vaccine optimism.
The World Trade Index (WTI) crude gained 1.14 percent and is trading at $45.43 per barrel, while Brent went up by 1.23 percent and is trading at $48.40 per barrel.
The index showed upward momentum following the announcement by the pharmaceutical company AstraZeneca on Monday that its COVID-19 vaccine was 70 percent effective in trials and could be up to 90 percent effective.
However, any viable vaccine is not likely to be ready for mass use in the next few months, meaning lockdowns and travel restrictions will be in place into next year, said a news report. The delay in the availability of the vaccine makes it likely that OPEC+ (Organization of the Petroleum Export Countries (OPEC) and allies including Russia) will continue production cuts into 2021, as a meeting is set to start on November 30 following technical talks this week.
OPEC+ producers have been withholding supplies to support prices after pandemic lockdowns earlier this year caused a significant decline in demand. They are currently due to increase production by 2 million barrels per day from January 2021, which makes about 2 percent of global demand before the pandemic.
However, Pakistani experts on the matter are of the opinion that this increase in oil prices is temporary. Osama Rizvi, an energy market observer and oil market analyst at Primary Vision Network, spoke to ProPakistani, saying,
The current increase in oil prices is only temporary. Fundamentals do not justify it. If we look at the Google Mobility Data, it has been almost the same for over weeks, showing little to no movement. High-frequency data points show a plateauing of global economic activity. Jet Fuel Demand is at its lowest and will not recover any time soon. Consumer behavior has changed, so have preferences and spending patterns.
He said that the demand for oil is still very low, and floating storage is high when compared to the 5 years seasonally adjusted levels. The same is the case with inventory, he said. “Now that the news of vaccination has already been priced in, chances are that oil prices will make a correction. I believe it is at least 35 to 40 percent overpriced,” he added.