Oil Approaches Two Year Highs As Demand Recovery Optimism Goes Into Overdrive

Meanwhile, Trafigura boss says $100 oil is not out of the question: File Image/Pixabay

Tuesday saw another exceptional day for oil prices, with the now-seemingly impervious sentiment linked to demand recovery causing a near 2 percent rise to the highest levels in over two years.

After Vitol on Tuesday stated that demand will likely return to pre-pandemic levels in the second half of 2022, Brent rose $1.13 or 1.8 percent, to settle at $73.99 per barrel; earlier, the benchmark hit $74.07, its highest since April 2019.

West Texas Intermediate rose $1.24, or 1.8 percent, to settle at $72.12 per barrel, after hitting a session high of $72.19, its highest since October 2018.

Bullish sentiment was further strengthened when Russell Hardy, chief executive of Vitol, said oil would move between $70 and $80 per barrel for the remainder of 2021 on the expectation that the Organization of the Petroleum Exporting Countries (OPEC) would maintain its conservative output.

He added that with stock draws occurring for several months now, "The market is heading in the right direction."

Jeremy Weir, chief executive of Trafigura, speculated that there was a good chance prices could reach $100 per barrel due to falling reserves: "The supply situation is quite concerning: we've gone from 15 years of reserves to 10 years."

Tuesday's positive sentiment even extended to an assessment of Saudi Arabia, which recently posted alarming economic figures induced by the government-mandated Covid lockdowns: Goldman Sachs raised its assumptions for Saudi oil production by around 500,000 barrels per day (bpd), to reach 10 million bpd by the end of 2021 and 10.5 million in 2022.

Goldman also boosted its growth forecast for gross domestic product to 4.5 percent this year, compared to an earlier 2.5 percent.