For the first time since April and May 2020, the price of oil seems to be rising for the sixth week in a row. In the history of oil price, such a rally, apart from spring, appeared in March 2019. Nowadays, prices may rise in the hope of increasing demand next year.
The price of a barrel of WTI for the six weeks mentioned above has gained over 40 percent in total and has risen to the levels observed last time in early March, exceeding 47 USD per barrel. The last price increase is taking place even despite the announcement of OPEC+ allies to increase production by 500 thousand barrels per day from the beginning of 2021.
Vaccine equals demand?
The current situation on the oil market is ideal for the cartel because, apart from the increase in oil production, it will be possible to sell it at higher prices. The main factor that is beneficial for the price increase seems to be the prospect of a return of demand for the crude oil next year thanks to vaccination against COVID-19.
Reuters reported that the U.S. may start vaccinating as early as this weekend, while Canada, Bahrain, Saudi Arabia approved their first vaccines and the UK started distributing the vaccine early this week. The oil was also not hindered by the increase in stocks in the United States, which was the second-largest ever, at over 15 million barrels.
What is troubling the stock exchanges and the British currency?
Meanwhile, world stock exchanges are in a different mood today. The German DAX seems to be losing almost 1%, the French CAC 40 is falling by over 0.8% and the British FTSE 100 by 0.7%.
The main reason for the falls may be the negotiations on brexit. Earlier, the UK and the EU agreed to extend talks until Sunday, warning about the significant probability of disagreement.
The same concerns may apply to the British pound. It is worth remembering that with the politically crucial events taking place at the weekend, gaps may appear at the beginning of the following week. This in turn may cause some investors to prefer to close their positions on Friday. The FX option market may clearly indicate that increased volatility in pairs with GBP is expected, and this in turn may mean increased caution.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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