Oil prices rose above $63 for the first time since last January this morning as last week’s rally continued apace.
The combination of hefty supply cuts, optimism over the global rollout of Covid vaccines, and tension in the Gulf sent prices up.
Worldwide standard Brent Crude is currently up 1.2 per cent at $63.20, while US benchmark West Texas Intermediate (WTI) is up 1.7 per cent at $60.50.
Today’s increase comes on the back of a 5.0 per cent price rise last week.
As a result, prices have now recovered to pre-pandemic levels, though much of this is driven by artificial production curbs led by Saudi Arabia.
But prices spiked this morning after the Gulf kingdom reported that it had intercepted an explosive drone fired by Yemen’s Houthi rebels.
The incident is reminiscent of a number of past attacks launched from the southern state against oil assets in Saudi Arabia.
Hussein Sayed, chief market strategist at FXTM, said that the spike was unlikely to last.
“These kinds of incidents normally have a short-lived impact on prices as risk premiums evaporate quickly”, he said.
“The main factors contributing to the rally are an abating pandemic with vaccine rollouts allowing countries to gradually ease lockdowns, improving outlook for business activity, prospects of the $1.9 trillion US stimulus package and the disciplined supply curbs from OPEC+ members led by Saudi Arabia.
“US shale companies are very satisfied with current prices and may ramp up their production significantly in near future”, he added.
Australian broker Rakuten Securities said that prices could go as high as $70 – prices not seen since Iranian general Qassim Soleimani was killed at the beginning of 2020, prompting fears of escalation in the region.