Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Source: By Elizabeth Low, Bloomberg • Posted: Tuesday, February 23, 2021

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach$70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

Also see: Supercharged Commodity Boom: Definitely. Supercycle? Not Exactly

The loss of oil output after the big freeze in the U.S. should help the market firmas much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

WTI erased gains Tuesday but has soared in recent months

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

Prices
  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

Read more: Commodity Returns Hit Three-Year High With Oil Leading the Way

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

Other oil-market news:
  • China’s oil inventories rose by 16 million barrels in the week through Feb. 14 to 1.01 billion barrels, up for the third straight week, data provided by market intelligence firm Kayrros show.
  • U.S. shale explorers lost hundreds of millions of dollars in oil production from last week’s historic freeze that crippled Texas and left millions without power or water for days.
  • Fuel flows from Asia to the U.S. have gained after the cold blast left some of the biggest refineries facing a slow and messy restart.

— With assistance by David Stringer

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