Oil prices rose 2% on Monday. The price of oil reached its highest level in more than a year, with the expectation that the expected recovery in supply and demand contracted by COVID-19 will increase demand from the sector.
In Monday afternoon trading, WTI crude oil was up 2.3% to $ 58.14, while Brent crude oil was up 2.1% to $ 60.60.
Oil hasn’t traded that high since January 2020, just before the COVID-19 pandemic posed a significant risk to markets and the economy. However, the launch of Pfizer and Moderna’s COVID-19 vaccines raises expectations that demand for oil will return soon when consumers start traveling again.
More than 2 million Americans were vaccinated on Saturday and more than 42 million Americans have already received at least one dose of vaccine, according to the Bloomberg Vaccine Tracker. Daily COVID cases also fell below the 100,000 mark on Sunday, the lowest daily number of cases in more than three months.
As COVID cases continue to decline and vaccines continue to increase, more and more people will start traveling. With the relief, pent-up consumer demand will likely be unleashed in the economy.
The travel recovery is important for oil, as transportation by cars and airplanes represents the largest source of demand for commodities.
Also, oil supply has been reduced in recent weeks as Saudi Arabia cut its daily oil production for February and March.
The continued rise in oil represents an incredible reversal of expectations after the price traded at negative prices less than a year ago, due to both a decline in demand and an abundance of supply.