UK Markets closed

Oil rises on hopes of global economic recovery

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
LaToya Harding
·Contributor
·3-min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
A ship (top) of Chinese Coast Guard is seen near a ship of Vietnam Marine Guard in the South China Sea, about 210 km (130 miles) off shore of Vietnam May 14, 2014. Vietnamese ships were followed by Chinese vessels as they neared China's oil rig in disputed waters in the South China Sea on Wednesday, Vietnam's Coast Guard said. Vietnam has condemned as illegal the operation of a Chinese deepwater drilling rig in what Vietnam says is its territorial water in the South China Sea and has told China's state-run oil company to remove it. China has said the rig was operating completely within its waters. REUTERS/Nguyen Minh (POLITICS MARITIME ENERGY)
Oil has slumped in recent weeks, partly due to OPEC and its allies agreeing to monthly production hikes from May to July. Photo: REUTERS/Nguyen Minh

Oil prices rose on Monday amid optimism for an economic recovery and more positive vaccination numbers across Europe.

Prices were also boosted after US Federal Reserve chair Jerome Powell said in a TV interview that the US economy is poised for strong growth.

Brent futures (BZ=F) climbed 1.37% to $63.81 (£46.42) and crude futures (CL=F) were 1.45% higher to $60.18.

Oil has slumped in recent weeks, partly due to OPEC and its allies agreeing to monthly production hikes from May to July.

OPEC+ said it would bring back 350,000 barrels per day (bpd) of supply in May, another 350,000 bpd in June and a further 400,000 bpd or so in July.

In addition to this, rising infections in emerging economies such as India and Brazil, have also had an affect on oil. India reported an accelerated pace of increase in daily COVID-19 infections, with its seven-day average hitting 124,757 on Saturday.

The country is the world’s third-largest oil importer, consuming almost 10% of global crude oil exports.

Oil rallied slightly on Monday. Chart: Yahoo Finance
Oil rallied slightly on Monday. Chart: Yahoo Finance

"Crude oil prices are slightly firmer, caught between the two stools of rising supply and the risks of slowing demand, due to rising infections in places like Indian and Brazil, and the optimism over the economic reopening that are continuing apace in both the US and UK," said Michael Hewson, chief market analyst at CMC Markets.

It follows reports that the market’s attention is now on indirect talks between the US and Iran as part of negotiations to revive the 2015 nuclear deal between Tehran and global powers.

Nuclear talks between Iran and the US are set to continue this week after “constructive” progress made last week.

A step forward to returning to the 2015 nuclear deal may pave way for the removal of economic sanctions imposed on Iran, which include limiting its oil exports. A full restoration of Iran’s output may add more than 2 million bpd to global supply.

READ MORE: Oil prices rise amid strong economic data from US, China

It comas as Saudi Aramco (2222.SR) has agreed a $12.4bn deal with a consortium of investors that would give the group a minority stake in Aramco's pipeline assets.

The deal announced on Friday by Aramco and the group led by EIG Global Energy Partners is for a 49% share.

State-owned Aramco will retain a 51% stake in the pipeline arm, as well as full ownership and operational control of the network.

Under the plans, Aramco will lease the usage rights of its pipelines to the newly formed Aramco Oil Pipelines Company.

The new venture is valued at $25.3bn, with the group retaining rights to 25 years of tariff payments for oil transported through the kingdom’s crude network. This will not affect Aramco’s oil production, the company said.

Washington-based private equity firm EIG beat off a number of other bidders to land the deal, including Apollo Global Management (APO) and Global Infrastructure Partners. Fellow asset managers Blackrock (BLK) and Brookfield (BAM) were also in the running at one point.

It is the biggest deal the firm has announced since its record-breaking initial public offering (IPO) in 2019.

WATCH: What are SPACS?