The oil markets have been seeing the light as of late. Oil prices have reached an eight-month high, with WTI and Brent Crude trading around $45 and $48. This is from the recent positive vaccine news, alongside better than expected EIA data and geopolitical supply-side tensions.
Peter McNally, global head of industrials, materials, and energy at Third Bridge, stated that "it has been a really good run. We haven't seen a run like this since the spring after we went to negative prices." He also stated that "Sentiment has changed pretty quickly… lately it feels like supply and demand fundamentals are heading in the right direction."
Many markets have been revolving around optimism on a vaccine, and Oil is no exception. The Price of Oil has come a long way, from the price war between Saudi and Russia earlier this year, alongside Oil going negative in late April. With the vaccine in sight, the Oil markets are banking on increasing demand in the following months. Bloomberg also reported that Chinese and Indian refiners had issued a large number of tenders seeking crude Oil for loading in Jan, highlighting the strong demand from parts in Asia.
The supply side is also providing pressure for Oil upwards, with the geopolitical tensions rising with recent attacks on a fuel depot in Saudi and an oil tanker in the Red Sea.
However, the main governing body for the oil markets, OPEC, is having some troubles with their members. Iraq, which requires an oil fiscal break-even price of $64, is voicing their frustrations at OPEC's "one size fits all" policy. Iraq's Finance and Deputy Prime Minister, Ali Alawi, stated that "We have reached the limit of our ability and willingness to accept a policy of one size fits all."
Although they have breached OPEC's quotas many times this year, Iraq is quite influential within OPEC, as they are the largest producer after Saudi Arabia. OPEC is set to renew its policies regarding supply cuts on December 1st.
OPEC is placed in an awkward position, as rising oil prices means it's harder to come to a consensus for the 13 countries on whether they should continue to cut supply to the market, in turn, giving up the opportunity to lock in revenue for years to come.