Oil prices have seen a revival ever since global economies announced they are opening up borders, and by hopes of a sharp rebound in the world economy. Also, lifting travel restrictions and removing lockdown rules are all signs that demand for fuel will rise, ergo prices.
But can the upswing continue?
Impressive price rebound
According to CNN Business, oil markets have rapidly recovered with the US crude reaching $40 a barrel this week or an $80 leap from its unprecedented trip below zero just seven weeks ago, when it hit a low of -$40.32 a barrel on April 20.
Meanwhile Brent crude has more than doubled since mid-April.
The oil comeback also reflects enthusiasm for record-setting production cuts by OPEC, Russia and their allies, plus the sharp pullback in output from the United States, the world's leading producer.
Arab News wrote that Iraq confirmed its full commitment to the OPEC + agreement and reduce production for June and July (and likely after), the oil ministry said in a statement on Monday.
The Saudi minister stressed on Monday that the Kingdom’s determination to rebalance global oil markets in the wake of the successful weekend meeting of members of the OPEC+ alliance.
OPEC, Russia and other producers agreed on Saturday to extend record output cuts of 9.7 million barrels per day into July, curbing global supply by almost 10%.
Yet there are rising concerns that the rally in oil prices is too good to be true. The glut of unneeded barrels hasn't gone away. And the threat of a second wave of coronavirus infections looms large.
According to MarketWatch, the demand and price of oil tumbled due to the economic slowdown and has since begun to recover, but Australian think tank the Institute for Economics and Peace (IEP) warns a low price will affect countries in the Middle East, especially in Saudi Arabia, Iraq and Iran.
On Tuesday analysts at Goldman Sachs warned in a note that the rise in the oil price has been overdone and forecast a drop in Brent crude prices to $35 a barrel, from around $43 a barrel, within weeks.