Oil futures rose Tuesday, shaking off earlier weakness as signs of improving energy demand put global reference prices on track for an eighth session profit.
“As the supply dynamics of the global oil market are as clear and steady as in recent years, the focus of traders in the last few sessions has shifted to demand. With continued efforts to distribute vaccines, declining COVID case numbers and another major stimulus package en route through Congress, demand expectations are rising, ”analysts at Sevens Report Research wrote in a Tuesday newsletter.
The US benchmark West Texas Intermediate Crude Oil for delivery in March
CL.1, + 0.74%
CLH21 + 0.74%
rose 38 cents, or 0.7%, to $ 58.35 a barrel on the New York Mercantile Exchange after six consecutive profit sessions.
April Brent crude
BRN00, + 0.94%
BRNJ21, + 0.94%
55 cents, or 0.9%, at $ 61.11 a barrel on ICE Futures Europe after trading above $ 60 for the first time since Jan 24, 2020 on Monday. A win on Tuesday would be the eighth in a row.
“After losing momentum during much of January’s trading, the crude oil complex has rallied strongly for the past two weeks,” said Robbie Fraser, manager of global research and analytics for Schneider Electric, in a daily note.
“This rally was supported by longer term optimism and expectations of broader market strength, but current prices are likely to create some concerns that the rally is near an overstretched area,” he said.
Oil rallied on Monday as stocks continued their rally, helping to push major US benchmarks to another round of all-time highs. Broad market optimism remains tied to expectations for another large round of government aid under President Joe Biden’s $ 1.9 trillion proposal, as well as advances in vaccine adoption around the world.
Saudi Arabia’s decision to unilaterally cut production by 1 million barrels a day in February and March will help keep supplies in check, according to analysts.
However, COVID-19-related business restrictions are likely to remain a risk until global vaccination rates rise significantly, Warren Patterson, head of raw materials strategy at ING, said in a note.
In addition, price levels have risen to levels that are becoming increasingly attractive to producers, which could lead to a pickup in production that should offer some resistance to prices, Patterson said, noting that the US has increased the number of shale oil rigs has risen steadily since the end of November.
Schneider Electric’s Fraser said crude oil prices in the range of $ 55 to $ 60 were “historically sufficient to trigger new manufacturing activity in parts of the major US shale basins.”
“While the current supply-demand balance is tending towards undersupply, global crude oil and product inventories remain elevated and a rebound in US supply could prolong a full recovery further,” said Fraser.
In a monthly report on Tuesday the Energy Information Administration has its 2021 forecast US crude oil production by 0.8% to 1102 million barrels per day, but also forecast production for 2022 by 0.3% to 11.53 million barrels per day.
The prospect of a possible return of Iranian exports and the dissolution of the record deal between the Organization of Petroleum Exporting Countries and its allies, collectively known as OPEC +, “presents additional downside price risk,” Fraser said. Still, “the recent setbacks in Libya’s export recovery are a reminder that geopolitical risk continues to challenge production in several key regions.”
Back on Nymex, prices for petroleum products with March gasoline also fell
Declined 0.2% to $ 1.6718 a gallon while heating oil in March
HOH21 + 0.52%
added 0.4% to $ 1.7546 a gallon.
March natural gas
lost 2.4% to $ 2.813 per million UK thermal units.
Weekly US petroleum supply data will be released by the American Petroleum Institute late Tuesday, followed by the EIA early Wednesday.
According to an analyst survey by S&P Global Platts, domestic crude oil supplies are expected to decline by 2.7 million barrels in the week ending February 5. The survey also shows expectations for gasoline inventories to grow 2.7 million barrels and distillate inventories to decrease 1.7 million barrels.