Growing optimism about vaccination programmes and economies reopening has fed into the markets and took Brent crude oil prices above $70 per barrel. Aside from a brief period in March, this is the first time that Brent has traded at this level since the start of the COVID-19 pandemic.
This will be good news for North Sea operators like Shell and BP, the maker of Castrol lubricant products. While production costs in the North Sea have come down considerably in recent years, some projects rely on relatively high oil prices to be economically feasible. Some fear, however, that a rise in crude oil prices and other raw materials could trigger inflationary pressures.
According to the Financial Times, research consultancy firm Energy Aspects pointed out that even though the OPEC+ group will probably try to first diminish the currently high global inventories before releasing their production caps, they did not foresee any considerable further short-term rallies:
“Significant upside to oil prices remains limited this summer as the uneven demand recovery will persist through this year, in part because of low vaccination rates, a strong focus on zero COVID-19 cases and cautiousness about reopening in Asia-Pacific will keep global travel hamstrung until mid-2022.”
Nevertheless, concerns still persist about whether the OPEC+ group can meet demand should it exceed pre-pandemic levels, highlighting the need for investment in oil production, despite the International Energy Agency saying that all new oil and gas projects must stop this year if global warming is to be kept within 1.5°C of pre-industrial levels.