Crude prices up more than 30% since October but recovery in oil market likely to be long and slow

The oil price maintained strength this week, building on a good season with stronger Asian demand and hopes of more US fiscal stimulus. In Friday trading, Brent crude was holding above US$51 with West Texas Intermediate (WTI)above US$48 a barrel. Brent crude was testing US$52 this week, hitting a nine-month high later in the week as demand figures from India and China delivered strength to the demand forecast. Full capacity Refineries have been running at full capacity in India in the past two weeks and the Chinese market continues to demonstrate strength. Processing rates at Chinese refineries hit an all-time high in the last two months. Despite reports of increased coronavirus cases in the US, the country is rolling out and expanding its Covid-19 vaccinations. American jobless claims are at their highest in three months at 885,00, but with hope for stability in 2021 and the promised economic stimulus of around US$900 billion, there’s a sense of optimism coming back to the market. The president of Prestige Economics, Jason Schenker says it will be a long slow recovery. "Equity markets are not the economy, and neither of those are the job market, which is how the Dow can be near 30,000 while jobless claims reflect over 20.6 million people are receiving unemployment benefits". US crude inventories fell by more than 3 million barrels last week, according to the Energy Information Administration. Both OPEC and the International Energy Agency released their monthly oil reports this week, both agreeing that global energy demand will take longer to bounce back. OPEC says it expects global oil demand to be 89.99 in 2020 and reach 95.89 million barrels a day in 2021. We need to remember than global oil demand in 2019 was more than 101 million barrels a day. More oil expected from Libya More oil is also expected from Libya in the new year. OPEC is expected to re-visit it’s production adjustment in April. The ministerial monitoring committee will convene on-line early January. The IEA says it’ll be the end of 2021 before we see a recovery in global oil demand. The oil price has recovered more than 30% since October on stronger fundamentals and more convincing economic sentiment. The price is still down more than 20% since the start of the year. With Asian demand appearing to be back on track, producers are hoping for sustained stability and that the rest of the world will follow in coming months.