Brent, the international benchmark for two-thirds of the world's oil, breached the $60 a barrel mark, driven by production curbs among key producers, a global rollout of Covid-19 vaccines and optimism over additional US stimulus.
Brent jumped 1.40 per cent to $60.17 per barrel at 12.32pm UAE time on Monday, while US crude gauge West Texas Intermediate rose 1.30 per cent to $57.59 per barrel.
"A number of signs have been pointing to bullishness in the crude oil market," Avtar Sandu, senior manager of commodities at Singapore-based Phillip Futures, said. "Saudi Arabia’s pledge of extra supply cuts in February and March on the back of reductions by other members of the Organisation of the Petroleum Exporting Countries and its allies (Opec+), including Russia, is helping to balance global markets."
A weak US jobs report boosted "hopes of further stimulus measures and a weaker dollar against most currencies on Friday also supported commodities, with dollar-denominated commodities becoming more affordable to holders of other currencies," he added.
The US, the world's largest economy, could return to full employment in 2022 if President Joe Biden’s $1.9 trillion coronavirus rescue package is passed, Treasury Secretary Janet Yellen said on Sunday.
Opec+, the international coalition of producers led by Saudi Arabia and Russia, has been taking action to prevent an oversupply in the market since 2016. Saudi Arabia also announced a surprise unilateral one million barrels per day production cut in February and March to support oil markets.
The group will maintain its current level of curbs at 7.2 million barrels per day, equivalent to about 7 per cent of global supplies, until the end of March, which has been in place since the beginning of the year.
"Oil’s steady rebalancing since peak inventories in the second quarter of 2020 has continued unabated throughout winter, and since the start of 2021, demand indicators have picked up, signalling year-end softness was largely seasonal, rather than entirely driven by tighter mobility restrictions," Ehsan Khoman, head of Mena research and strategy at MUFG Bank, said.
"With vaccine rollouts now gathering pace across developed markets during what is likely the last widespread lockdown without a vaccine-resistant variant, we see a clear path to continued rebalancing once we move past the first quarter winter speed bump."
Global oil demand is forecast to increase by 5.9 million bpd in 2021 as economies recover from the coronavirus pandemic. Oil consumption in the OECD (Organisation for Economic Co-operation and Development) region is estimated to increase by 2.6 million bpd year-on-year, while in non-OECD countries demand is set to grow by 3.3 million bpd, according to Opec's monthly oil market report.
Oil demand from China, the world's second-biggest economy, is also rising, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.
"Looking at the record number of supertanks at China’s ports, the rising Chinese demand could help explaining a part of the positive push in prices," she said. "There are apparently 127 supertanks near Chinese ports, some 30 per cent higher than the four-year average for this time of the year."
From the supply perspective, "Joe Biden’s promise to cancel the Keystone XL oil pipeline is certainly being priced in, along with Opec+ sticking to their production cut quotas," she said.
Swiss bank Julius Baer raised its oil price estimates for the year on the back of what it said is robust emerging market demand, a slump in the shale industry, and Opec+ cuts that are driving the recovery.
"Given the current, stronger than initially expected fundamental tailwinds, we raise our near-term oil price target to $65. Oil prices could temporarily spike above $70 by mid-year," said Norbert Rücker, head of economics research at Julius Baer.
