The price of oil has risen above $45 a barrel, the first time it has reached that level since the coronavirus outbreak forced countries across Europe into lockdown. However, this rebound may prove to be short-lived, according to oil market analysts.
Global oil prices climbed to highs of $45.50 a barrel on Wednesday after official US data revealed that its stores of crude – which were filled to the brim in April – are beginning to empty as energy demand returns in line with the easing of lockdown restrictions.
The oil price has doubled since late April when Brent crude tumbled to 21-year lows of $16 a barrel. But Chris Midgley, of S&P Global Platts, said the price of Brent crude may struggle to stay above $40 a barrel over the next couple of months as global oil production begins to rise and demand begins to slow due to the timing of maintenance at refineries.
The Opec oil cartel and its allies, known as Opec+, have started to increase their output after an historic agreement struck earlier this year to rein in production to help prevent the global market becoming oversupplied during the first wave of coronavirus lockdowns.
Their oil production jumped by over 1m barrels a day last month as the deal ended, led by an 850,000 barrel a day increase from Saudi Arabia.
“Stocks are bloated, Chinese buying is set to slow, and global oil refining is heading into turnaround season,” Midgley said, adding that oil prices may only rise towards $50 a barrel by the end of 2021.
Bjørnar Tonhaugen, the head of oil markets at Rystad Energy, said rising Covid-19 infections could lead to further travel restrictions, which would threaten demand for fuels and “likely keep prices in check for the remainder of the summer”.
“A bullish sentiment is justified today, on the US stocks news, but we believe bulls may need to take shelter back at the ranch in coming days, as Covid-19 takes centre stage again,” Tonhaugen said.
“It is interesting to see how Opec+ itself will assess the new reality and if any new amendments of the production curtailment deal will be suggested later this month in its coming meeting.”