Americas News
Oil Dips, But Full Steam Ahead For 2021 Demand Rebound, Say Analysts
Although two key crude benchmarks dipped on Friday and ended the week roughly flat after seven consecutive weeks of gains, oil still settled near $70 per barrel, supported by optimism for demand recovery during the second half of this year.
That, plus production cuts by major producers, resulted in Brent settled down a mild 41 cents to $69.22 per barrel; West Texas Intermediate also ended down 41 cents to $65.61 per barrel.
Jim Ritterbusch, president of Ritterbusch and Associates, said, “Demand for risky assets such as oil continues to be buoyed by the White House relief package and an almost daily flow of optimistic vaccine headlines.”
These headlines include disclosures that the existing vaccines are effective against the Covid variants; Israel's economy reopening almost fully due to a 30 percent weekly drop in infection rates; and almost 100 million doses of the vaccine being administered so far in the U.S.
Meanwhile, Baker Hughes reported that U.S. drillers are cutting the number of oil and natural gas rigs operating for the first time since November, and with the Organization of the Petroleum Exporting Countries (OPEC) forecasting a stronger oil demand recovery in the second half of this year, RBC Capital analysts said the fundamentals for summer gasoline was the most bullish in nearly a decade.
As for OPEC's strategy of also restriction production to current levels, industry data analytics firm OilX on Friday suggested that the strategy is working because traders have been draining crude supplies from the massive St. Lucia and Freeport oil tanks in the Bahamas to capitalize on the nearly 35 percent surge in crude prices; inventories in the region are now at a 17-month low and less than half the peak reached in June.
For its part, PVM analysts stated on Friday, “The stronger-than-expected rebound in the second half of this year implies that the global economy and hence oil demand outlook is close to shaking off its COVID woes.”
Also, JP Morgan anhalysts on Friday forecast U.S. crude oil production to average 11.78 million barrels per day (bpd) in December 2021, up 710,000 bpd year-on-year.
They wrote, “At current prices, most U.S. onshore operators are economic, leaving a vast group of operators, from large public companies to private players, in good position to ramp up activity in 2H21 and build solid momentum for higher volumes in 2022.”
