How Are Prices at Pre-COVID Levels?

By Published On: February 8, 2021Categories: Daily Market News & Insights

After notching daily gains during each trading session last week, oil prices are continuing to march higher. WTI crude is trading above $57/bbl this morning, the highest in over a year – quite an accomplishment after plummeting to negative levels last year. Eyes today are on the stimulus bill, which is becoming increasingly likely as a $1.9 trillion package. Treasury Secretary Janet Yellen believes the bill will bring the US economy to full employment by 2022, which would support fuel demand. Such high spending is also expected to bring inflation, which weakens the dollar and pushes crude prices higher. And, according to one theory, the NFC’s win last night might be a bullish market indicator for the year, too.

One might reasonably look at current fuel prices and ask, “Wait….how are we back at pre-COVID levels?” While demand is still below pre-COVID norms, several bullish factors are present now that were not present a year ago. Among them are 7+ MMbpd cuts by OPEC and their allies and a $1.9 trillion stimulus package. With the vaccine promising a return to typical demand, supply cuts and government spending are pushing oil to excessively high levels.

Are high prices sustainable given current cases and demand data? Absolutely. There are two sides to the coin for oil fundamentals: demand and supply. As long as supply remains lower than consumption, oil prices will keep rising. Of course, the rally will eventually reach a point triggering more supply; for now, though, both OPEC and US shale producers seem happy to keep supply low and rake in the higher prices.

Oil prices are up by more than a dollar this morning, sustained by positive sentiments towards the stimulus legislation. WTI crude is currently trading at $57.87, a gain of $1.02 (+1.8%). Brent crude, which is more popular in the Eastern Hemisphere, is now above $60/bbl.

Fuel prices are also seeing strong gains this morning. Diesel is trading at $1.7427, up 2.9 cents (+1.7%) from Friday’s closing price. Gasoline is trading at $1.6698, a 2.1 cent gain (+1.2%).

This article is part of Daily Market News & Insights


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