The decline in oil prices ended on Monday, and the recovery continued during the second day.
Some positive news about the countries containing COVID-19 and the growing confidence in the supply and demand picture seems to keep prices at a high level.
In this case, the expectations that oil will cost $ 100 this year have disappeared.
Oil prices fell for seven consecutive trading days, right up to last Friday. This was the longest losing streak since 2018 for the international benchmark Brent crude oil, and since 2019 for the American benchmark West Texas Intermediate. Brent crude oil lost 8.8%, and WTI plummeted by 10%.
On Monday, oil recovered most of the lost value: Brent rose by 5.5%, and WTI by 5.6%. This rally continued on Tuesday when Brent crude futures rose by 2.4%, reporting to $ 70.38, and WTI crude oil by 2.2%.
For most of last year, the dynamics of oil production depended on two factors: the spread of COVID-19 and the decisions of OPEC and its allies on whether to increase or reduce production. In January, OPEC decided to keep production at a low level, and in July, it announced that it would gradually restore production on the market over the next year. The group is going to meet only next month.
During the past two weeks, the virus has continued to spread in several countries, correspondingly, the demand for gasoline and jet fuel is decreasing. This contributed to the sell-off of oil. However, data from China shows that travel is on the rise in that country.
Jeff Currie, head of commodity research at Goldman Sachs, argued in a note published on Monday that the sell-off was exaggerated in part because supply remained low. In general, Currie believes that manufacturers are currently investing too little in new projects to catch up with future growth, which means that prices are likely to rise.
He predicts that oil price will hit $ 80 a barrel for the fourth quarter, one of the highest on Wall Street.
