New Heights for Oil and Pound as Hope Looms in the Horizon

The price of oil has hit its highest in over a year, propelled by hopes of recovery, and the rising tensions in the Middle East. Slowly but steadily, oil has been recovering since the catastrophic fall that it had last year when its price went negative for the first time in history. With mass inoculation efforts taking place across the globe, the oil industry seems to be responding positively.

At the time of writing, WTI finally surpassed the $60 mark for the first time in over a year, Brent is up 0.81% and Royal Dutch Shell is up 3.19%. The new rising tensions in the Middle East may have contributed to the price increase too, as the conflict between the Houthi rebels in Yemen and Saudi Arabia is escalating.

On the other hand, the pound is enjoying some optimism as well, as it strengthens against the dollar. The cable (GBP/USD) is experiencing a bullish sentiment as the prospects of eased measures in the UK make the headlines.

According to Michael Hewson of CMC Markets, “The UK’s vaccine rollout program is much further advanced than everyone else’s in Europe as the government, over the weekend, met its target of 15m people getting their first jab by 15th February. Assuming everything else goes according to plan, this opens up the prospect that we could see a slow easing of restrictions sooner rather than later, with the next update on measures, due a week today. This raises the much-discussed prospect that we could well see an explosion of pent-up demand, as consumers ramp up their spending in the form of post lockdown boom, which could see up to £150bn unleashed of excess savings over the next few months, with a similarly robust rebound predicted in the US as well, as new stimulus payments trickle down into the US economy.”

The airline and hospitality industries are hopeful that travel and tourism can begin to take the shape they once had.

In an article published by FXSteet, it was quoted, “We are upbeat on the outlook for demand this year, premised on the view that mass vaccination will enable the opening up of the hospitality and travel sectors in many advanced economies. In particular, we expect a release of pent-up demand in the second half of the year. What’s more, we suspect that oil use will still pick up strongly even if international travel restrictions remain in place, as higher levels of domestic travel offset some of the weakness in jet fuel demand.”

The FTSE 100 started the week on a positive note, up almost 1%, which is the highest it’s been in roughly two weeks. Additionally, it appears that airline companies have also had a good start, with IAG reporting a 3.5% rise.

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