Home Forex News Oil Prices at 10-week Highs on Easing COVID-19 Restrictions

Oil Prices at 10-week Highs on Easing COVID-19 Restrictions

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  • Surging Oil Demand
  • Easing COVID-19 Restrictions
  • OPEC Production Cuts

A spike in fuel demand as countries ease coronavirus curbs continues to offer support to oil prices. A 10-week rally, after a plunge to record lows, has seen oil price rally and find support above the $30 a barrel level.

Oil Demand

Demand for oil and its products continue to edge higher as European countries emerge from lockdowns, designed to curb the spread of the deadly virus. U.S crude oil stockpiles are also edging lower as states continue to ease lockdown restrictions. West Texas Intermediate oil has already jumped close to the $40 a barrel level not seen in months.

Oil prices rose to the highest level in months in Thursday trading session as fundamentals in the battled energy sector continued to improve. Production cuts have helped bring glut in supply under control, conversely fuelling a surge in prices.

Oil prices are expected to continue rising as people start venturing out as the coronavirus pandemic slowly comes under control. However, experts are warning that the second wave of infections with the easing of restrictions could weigh in on oil demand.

Production Cut

A second wave could weigh in more of U.S oil producers that are planning to ramp up production in a bid to generate much-needed cash to avoid permanent loss of production. However, a ramp-up in production at a time when demand is yet to increase substantially could also take a toll on oil prices sooner than later.

The organization of the Petroleum Exporting Countries has made important strides that continue to offer support to oil prices. A cut in supply by a record 9.7 million barrels per day has gone a long way in balancing the forces of supply and demand.

With demand in oil ticking higher around the world, OPEC production cuts should help support oil prices above the $30 a barrel level. Depending on how demand comes back online, the $40 barrel level appears to be the immediate barrier that could curtail a further surge in prices.

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