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Global oil prices on slow yet apparent recovery path

Monday, 28 December 2020 | 13:00

Global oil prices have been directly hit by the COVID-19 pandemic this year, even logging a historic negative price during the market crash in April. Since the futures contracts for West Texas Intermediate (WTI) traded in minus territory for the first time in history, global oil prices have been on a slow, long-term recovery, despite fluctuations.

WTI February futures were traded at $48.20 per barrel as of 7 p.m. GMT, Christmas Eve, on the New York Mercantile Exchange (NYMEX), up 0.17 percent from the previous session.

During the past month alone, the WTI price has risen about 11.75 percent, reaching up to $50 per barrel last Friday. The oil prices’ recent upward move has been attributed to market expectations of an economic recovery next year based on large-scale vaccine distribution against COVID-19.

Brent Crude Futures, which take up more than half of international contracts, also moved in a similar upward path, trading at $51.37 a barrel Christmas Eve, up 0.25 percent from the previous session. The futures price has jumped by 7.9 percent in less than two months, since the price stood at $47.59 at the beginning of November.

While these numbers are still much lower than their prices before the global pandemic hit the market, their steady increases have relieved many local retail investors who bet on the oil-based derivatives linked securities (DLS) market right before COVID-19.

Recently, local DLS products based on WTI and Brent crude oil managed by Hanwha Investment & Securities and Shinhan Financial Investment successfully reached their maturity, as crude oil prices approached the level of 2019 when the products were sold to consumers.

Market watchers expect global oil markets to be normalized sometime around next year, as major financial firms including Goldman Sachs predict next year’s WTI price to reach $52.8.

However, market uncertainties surrounding COVID-19’s further spread still remain; market experts also voiced the possibility of rising electricity bills here in the latter half of next year. The country’s electricity billing has generally been linked to the prices of liquefied natural gas (LNG), coal and petroleum ― which are mostly coupled with global oil prices. If electricity bill go up, industrial sectors such as steel and petrochemicals could face potential price hikes next year.
Source: Korea Times

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