Brent crude oil, a global benchmark for Nigerian oil, rose to $62.43 per barrel on Friday despite OPEC plus lowering its demand projection for the year.
The oil price has continued to appreciate even with global uncertainties and challenges surrounding COVID-19 vaccine distribution. This is largely due to the continuous decline in U.S. crude oil stockpiles to 11 month low last week, China increasing importation of the commodity, OPEC production cuts for February and Saudi Arabia’s decision to reduce production by 1 million barrels per day for the next few months.
However, experts are warning that the commodity may have gotten a little ahead of itself after rising by 23 percent so far this year.
US West Texas Intermediate crude oil rose to $59.82 a barrel on Friday, the highest level since January 2020.
“My personal view … is that the price is too frothy, and that it doesn’t warrant a WTI price of greater than $58,” Regina Mayor, global and U.S. head of energy for KPMG, said of what’s driving higher oil prices.
Mayor added that “Supply is coming down. … We’re all surprised by how quickly it’s taken to draw down those stocks and to get us closer to the 5-year rolling average. We’re [also] seeing real-life improved demand out of China and India, although I caution that the China number is a pandemic comparator for January 2020 versus January 2021, and then there are expectations that demand will increase with vaccinations and more people moving around.”