Oil prices have returned to pre-pandemic levels. The price of the world’s favourite commodity slumped last spring as major economies locked down. US oil futures briefly turned negative as traders found themselves stuck with fuel that nobody wanted. Yet Brent crude prices have rocketed by 180% since their nadir to trade above $60 a barrel this week. Before Covid-19 took hold the contract was trading around $59 a barrel.
Joe Biden’s announcement that he will not lift sanctions on Iran (see page 10) provided the “immediate catalyst” for the latest price bump, says Julia Horowitz on CNN. But the broader rally is all about the vaccines and hopes that big economies are well on the way to returning to normal. On the supply side, oil exporters’ cartel Opec and ally Russia have continued to limit output. Saudi Arabia’s announcement that it will cut output by a further one million barrels per day (mbpd) from this month has provided an extra fillip. Opec and its allies have “held back a cumulative 2.1 billion barrels of oil” since last April, says Justin Harper for the BBC. They didn’t have much choice: air passenger traffic is still down by 70% on last year.
US producers have done their bit too, says Joe Wallace in The Wall Street Journal. The country is “pumping 17% less crude” than it was on the eve of the pandemic as lower prices have forced the closure of less economical wells and halted new exploration.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The medium-term outlook for oil is positive, but expect setbacks along the way. This rally is “overextended”, says David Sheppard in the Financial Times. Prices may be back at pre-pandemic levels, but demand, still six mbpd below 2019 levels, is not. There is “excessive... bullish exuberance” in oil markets, says Stephen Brennock of brokerage PVM. Traders are high on the promise of stimulus.
-
House prices rise 2.9% – will the recovery continue?House prices grew by 2.9% on an annual basis in September. Will Budget policies and ‘higher-for-longer’ rates dent the recovery?
-
Nvidia earnings: what to expectNvidia announces earnings after market close on 20 November. What should investors expect from the semiconductor giant?
-
Investing in a dangerous world: key takeaways from the MoneyWeek SummitIf you couldn’t get a ticket to MoneyWeek’s summit, here’s an overview of what you missed
-
DCC: a top-notch company going cheapDCC has a stellar long-term record and promising prospects. It has been unfairly marked down
-
How investors can use options to navigate a turbulent worldExplainer Options can be a useful solution for investors to protect and grow their wealth in volatile times.
-
Invest in Hilton Foods: a tasty UK food supplierHilton Foods is a keenly priced opportunity in an unglamorous sector
-
HSBC stocks jump – is its cost-cutting plan already paying off?HSBC's reorganisation has left questions unanswered, but otherwise the banking sector is in robust health
-
Lock in an 11% yield with SabreTips Sabre, a best-in-class company is undervalued due to low profits in the motor insurance industry. Should you invest?
-
Byju’s – the startling rise and fallIndia’s educational technology start-up Byju's attracted big-name backers and soared to vertiginous heights during Covid. It has now plummeted. What happened?
-
Nestlé is in trouble as it pushes prices upNestlé has pushed up prices for customers and now it's suffering the consequences, leaving a spotlight on its performance and shares
