Brent crude oil surged more than two per cent on Monday following a missile attack on facilities owned by energy giant Aramco in Saudi Arabia, and on optimism about the demand outlook as the global economy recovers.
A barrel of the black gold jumped 2.11 per cent to $70.82 a barrel, the highest since May 2019. In Asian trading, oil traded as high as $71.38 a barrel while US crude also touched its highest in more than two years.
Brent crude futures surged above $70 a barrel for the first time since the Covid-19 pandemic began. Oil prices surged more than 35 per cent this year so far.
By 0255GMT, Brent was trading at $69.48, still hovering around its highest level in more than a year. US West Texas Intermediate (WTI) crude was up 14 cents or 0.2 per cent at $66.23 after touching $67.98 a barrel, its highest since October 2018.
GCC fiscal respite
Analysts and energy experts attribute the oil rally to an announcement from oil-producing countries that they’d increase output by less than expected, which helped prices reach highs that were unthinkable just months ago. They said bullish Chinese export data and the outlook for US stimulus also supported oil and other markets in Asia.
Market experts said Gulf Cooperation Council countries are set to get some fiscal respite after Opec and its allies last week agreed to extend most oil output cuts into April.
While lower output could weigh on the region’s overall growth this year, higher oil prices are set to curb deficits, providing some headroom for a potential boost to GCC economies recovering from the Covid-19 pandemic.
$70 barrier is not sustainable
Meanwhile, Total’s chief executive said on Monday it could take two years for the world economy to recover from the coronavirus pandemic and that oil prices were unlikely to remain at the current high of $70 a barrel. “I am not betting on prices staying at $70 a barrel, for me the right price is around $50-$60 a barrel,” Patrick Pouyanne told BFM business radio.
The surging crude prices will have an impact on domestic petrol and diesel prices across the globe in coming weeks. “Geopolitical tensions have supported the crude prices. Brent may test $73 and WTI may test $70,” Anuj Gupta, DVP Research, Angel Broking.
“Petrol and diesel prices may rise further in India.”