Americas News
Biden Buoys Oil As Analysts Change Tune And Predict Demand Recovery in Q2 2021
The perpetual seesaw of oil trading on Tuesday suddenly swung upward by over 2 percent on the strength of expectations that incoming U.S. president Joe Biden would endorse more government stimulus designed to encourage economic growth during the pandemic.
Additionally, traders who in the previous session were dismayed by rising coronavirus rates in China were on Tuesday bullish on data showing that China's refinery output rose 3 percent to a record high in 2020.
Brent rose $1.15, or 2.1 percent, to settle at $55.90 per barrel, while West Texas Intermediate rose 62 cents, or 1.2 percent, to settle at $52.98.
If news reporting is anything to go by, the analytical community on Tuesday seemed to have shrugged off their long-held fear that rising coronavirus rates would ruin a demand recovery in 2021: although the International Energy Agency cut its outlook for oil demand this year, it predicted a recovery in the second half of the year to an annual average of 96.6 million barrels per day (bpd), thanks to the Covid vaccines now being made available across the globe.
Also, Halliburton Co, in reporting that it had beaten profit estimates on cost cuts and achieved modest gains in activity, predicted a recovery in the global oil and gas industry from the second quarter.
This was followed by Mohammad Barkindo, secretary general for the Organization of the Petroleum Exporting Countries (OPEC), who said he thought the oil market would recover this year: "We all agree that the recovery is fragile, there are still more uncertainties, but we are cautiously optimistic that the recovery will materialize this year."
But it was the advent of a new leader in the White House that mainly caused the change of trading trajectory on Tuesday: Bjornar Tonhaugen, head of oil markets at Rystad Energy, remarked, "As we are approaching the beginning of the Biden administration era in the U.S., traders now have their hopes up for a rapid positive effect on markets coming from the promised [$1.9 trillion] stimulus package."
Not all the prognostications about the oil market were rosy on Tuesday, however: John Kemp, commodities analyst at Reuters, noted that a poll of 950 energy market professionals predicted oil prices to remain lower once the pandemic is over and the economy has fully recovered.
According to their calculations, by 2024 Brent prices are expected to average $60-65 per barrel, down by $5 from a forecast of $65-70 previously.
