Lockdown relaxations help crude oil recover, but its not out of the woods

Steadily easing lockdowns across the world and the consequent uptick in fuel demand has resulted in crude oil prices rising at a fair clip over the past month, trading at around the $34-36 per barrel mark currently. However, while the commodity has doubled in value since its record low of $16 a barrel in late April, analysts note that this upward surge is unlikely to be sustained for long.

Friday’s price movements stand as an example of how vulnerable crude oil prices are to the demand situation. Renewed worries over China’s post-lockdown economic recovery saw Brent crude lose over 5 per cent of its value in just one session. “The past month’s price increase has primarily been due to the easing of lockdowns globally and the expected improvement in demand. But, any price increase will eventually see more production come online, which may result in another sharp decline,” said a senior executive at a State-run oil marketing company.

Apart from China, fuel demand in the world’s third largest consumer of crude — India — is also a worry. According to industry sources, fuel demand has been rising following a widespread easing of transport and industrial restrictions. But it is still only around 60-70 per cent of the normal levels.

New Indian Express
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