Oil Nudges US$70 as Hopes Grow for Global Recovery

The price of crude oil is nudging US$70 a barrel for only the second time in over a year as hopes grow of a resurgent global economy. Brent crude, the global benchmark, traded within a few decimal points of US$70 on Wednesday on a raft of positive economic news, including the International Monetary Fund’s forecast that growth next year would hit 6%, the highest in four decades. That followed optimistic assessments by international energy experts of a recovery in oil demand in the second half of the year, and strong demand in the US as lockdown restrictions are lifted and drivers take to the roads again. Even the bad news from India, where the COVID-19 pandemic is raging, could not dampen an overall positive outlook for the global economy and energy demand.

India is a big importer of crude oil, but its economy is small in relation to the big power blocs of the US, China and Europe. Traders were particularly buoyed by a report from the US government that jet fuel, which has been especially badly hit as flights were grounded by the pandemic, was set to jump by 30% this summer. “If the US is flying again, the world economy will soon be flying too,” said one oil trader in Dubai. Stephen Brennock of oil broker PVM said: “A return to US$70 oil is edging closer to becoming a reality.” At that level, oil revenues have significant impact on the fiscal balances of many producers, including Saudi Arabia.