On Monday, oil prices increased to their record high in over a year. They got a boost from supply cuts among key producers and optimism for further U.S. economic stimulus measures to raise demand.
By 1442 GMT, Brent was up 1.2%, which equals 68 cents, and traded at $60.02 a barrel. Meanwhile, U.S. West Texas Intermediate boosted 1.2% or 68 cents and stood at $57.53 a barrel.
According to Rystad Energy’s vice president for oil markets, Paola Rodriguez Masiu, the market is finally recovering after the long struggle and taking a proper breath.
Significantly, both contracts traded at their highest levels since January 2020.
Analyst at Swiss Bank Julius Baer, Norbert Rucker, announced that oil prices are back close to pre-pandemic levels.
Furthermore, the six-month Brent spread hit a high of $2.54 on Monday, its highest since January 2020.
Last week, the world’s top exporter Saudi Arabia maintained monthly crude prices to Asia intact despite expectations for small cuts. According to Howie Lee, OCBC economist, it sent a very bullish signal.
A weaker greenback versus other currencies supported commodities
A weaker U.S. dollar versus other currencies also supported commodities as dollar-denominated assets becoming more affordable for other currencies holders.
Investors are also watching on a $1.9 trillion COVID-19 aid package for the United States. It will likely be passed by lawmakers this month.
Optimism that Iranian oil exports would soon return to the market has been dampened, strengthening oil prices.
U.S. President Joe Biden announced the United States would not lift sanctions on Iran to get it back to the negotiating table. At the same time, Iran’s Supreme Leader Ayatollah Ali Khamenei stated that they should lift all sanctions first.
Higher crude prices are encouraging U.S. producers to boost output.
Based on energy services firm Baker Hughes report, the U.S. oil rig count, an early indicator of future output, surged last week to its highest since May.