There are many reasons for being cautious about recovering oil demand, despite the promising indications after the start of the distribution of the Corona vaccine in a number of countries.

In a report published by the American "Bloomberg" website, writer Julian Lee says that the Covid-19 vaccines have raised hopes for a rapid rise in oil demand next year, but it seems that it is too early to abandon caution about the return of demand to normal levels.

The price of a barrel of Brent crude reached $ 50 per barrel during the past week, the highest level recorded since March, before the Corona pandemic began to destroy people's lives and the economic closure causes a decline in oil consumption, and it seems that the situation is heading towards a reckless abundance in production, but There is a long way to go before the crude oil markets return to normal.

The vaccine and the travel sector

Vaccines are undoubtedly good news, but there are some problems - as the writer says - it is expected that the vaccination of a large proportion of people will take several months, and even with the comprehensive vaccination program being implemented in the United Kingdom, Minister of Health Matt Hancock warned, on Thursday, that "During the next few months we will not have adequate protection" to ease restrictions, as it is not yet known whether the people who received the vaccine are able to transmit the infection or not.

It is likely that many countries will witness more lockdown measures in the coming period. Also, people still have to withstand during the northern hemisphere winter, a period during which the virus is expected to worsen, because large family and social gatherings during the holidays will Causing infections, and sharp increases in the number of cases are sure to lead to further travel restrictions and further damage to the economy.

According to the author, the recovery from the impact of the virus on economic activity will not happen overnight, for example, commercial flights reached 60% of last year’s levels, after they stumbled in August.

The international travel sector was the most affected, which is the largest consumer of fuel, and the return of flights to normal levels depends on governments' confidence in vaccination systems, the speed of vaccine distribution and the extent of its generalization, which threatens to continue closing the airspace between countries.

The price of a barrel of Brent crude reached $ 50 a barrel last week, the highest level recorded since March (Reuters)

Long path

The writer believes that the developments of the Corona crisis should not be monitored only, as the increase in tariffs on international trade and the chaotic exit of the United Kingdom from the European Union, along with the possibility of the new US president being exposed to obstacles in the Senate, may all slow down the pace of the economic recovery.

Even when fuel consumption for transportation and industry begins to rise, which is expected to happen next year, there is a long path that must be traveled before this translates into a similar increase in demand for crude oil, knowing that there is a huge surplus of stocks awaiting distribution in the market.

According to the International Energy Agency, these stocks rose at the end of September by 9% year-on-year in the developed countries of the Organization for Economic Cooperation and Development.

According to the writer, optimists may focus on that China's imports of crude oil are on the way to rise by 10% this year, but this is mostly due to record buying levels during the price collapse, and a lot of additional supplies have gone to storage tanks.

In light of the high levels of supply, OPEC Plus will add 500 thousand barrels per day to oil supplies next month, which is less than what was initially planned, but it may be enough to turn the balance of expected global consumption in oil stocks in the first half of 2021.

The high prices of crude oil recorded in recent weeks will put pressure on refining margins and prevent factories from withdrawing crude oil from tanks and converting it into refined products, and the only solution to improving margins is to increase the prices of refined products or decrease the prices of crude oil.