Brent crude rose above $60 a barrel for the first time in more than a year as stockpiles tighten and the demand outlook improves amid the global rollout of Covid-19 vaccines.
It’s another milestone in a stellar comeback from the biggest demand destruction in a generation after the pandemic forced countries to lock down, devastated economies and grounded planes. The revival is a boost for global energy companies and petro-states whose budgets were ravaged last year.
Global stockpiles in onshore tanks and floating storage are estimated by the International Energy Agency to have shrunk by about 300 million barrels since Opec and its allies made deep production cuts in May. Reduced supply and the vaccine-driven demand boost have entrenched Brent’s futures price curve in a bullish backwardation structure, which encourages more draining of oil tanks.
China has been a key driver of the market rebound. The number of tankers sailing toward the nation jumped to a six-month high on Friday. Royal Dutch Shell CEO Ben van Beurden said last week that fuel sales in the nation are back into “significant growth mode.” Meanwhile, Indian demand is almost back to year-ago levels as consumption of cooking fuels and gasoline surged on the back of forced lifestyle changes due to the virus.
“Managing to breach $60 again feels like the market is finally resurfacing after the long struggle,” said Paola Rodriguez Masiu, vice president for oil markets at Rystad Energy A/S.