The world is full of paradoxes. It is strange that the number of new virus cases exceeds the reading of the previous year and is still rising. At the same time, Brent crude is trading around $70 per barrel. In April 2020, it slumped below zero for the first time in its history. Experts at the International Energy Agency (IEA) suppose that fundamental indicators of the oil market are really stronger than a year ago. For example, oil reserves in developed countries have almost reached the pre-crisis levels. Moreover, the US dollar is losing in value.

The IEA predicts that in 2021, the global oil demand will advance by 230,000 barrels per day to 5.7 million barrels per day. This pushed Brent price from the range of $61-65 per barrel to the highest level since the middle of March. Now, we can see the strongest backwardation last seen a month ago. This is a bullish factor for Brent quotes. According to the estimates provided by the IEA, oil reserves in developed countries exceed the average reading of the last five years, including 2019, just by 57 million barrels. In July, the indicator reached its peak of 249 million barrels.

Oil reserves in developed countries

In India, the largest oil consumer, the coronavirus is still rapidly spreading and the number of infected people is skyrocketing. This causes oil refineries shutdowns, thus negatively affecting oil demand. At the same time, in other parts of the world, the situation is completely different. In the US, about 207.5 million people or 63% received at least one dose of the vaccine. In the EU, only 25% of the population get their first jabs. However, Goldman Sachs has estimated that the indicator will increase to 37% by the end of May and to more than 50% by the end of June. Europe is increasing the pace of the vaccination campaign. Moreover, the news that Pfizer will supply 100 million doses more than expected boosted the euro.

The share of the euro in the US dollar index is 57%. That is why the greenback's depreciation was quite predictable. This situation is one of the drivers of the rally in Brent crude and WTI futures as both benchmarks are traded in the US dollar. Moreover, yields on the US government bonds fell, thus adding to the greenback's drop.

News from Libya also supports oil prices. This country, after the civil war in 2020, managed to increase production from almost zero to 1.25 million barrels per day in March, which is the highest value in the last 8 years. However, here is a new attack. The National Oil Corporation is cutting exports, complaining about the reluctance of the country's central bank to invest in the energy sector.

On the daily chart, we can see that Brent crude broke the upper limit of the range of $61-64.9 per barrel. Bulls have already made several steps towards the target located at the 88.6% Fibonacci retracement level of the Bat pattern that is $70.4. It is recommended to keep the opened long positions and increase them amid rebounds.

Brent, daily chart