Analysts also think Brent will average $59.07 per barrel this year: File Image/PixaBay
Crude prices on Friday declined due to the U.S. dollar rising as government bond yields held near one-year highs, but both Brent and West Texas Intermediate headed towards 20 percent monthly on U.S. supply disruptions and optimism over demand recovery due to the Covid vaccination programs.
Still, Bob Yawger, director of energy futures at Mizuho, was dismayed by Friday's trading as it preceded a potential output increase from the Organization of the Petroleum Exporting Countries (OPEC) at the cartel's meeting next week.
He said, “It’s a dicey time - it doesn’t seem like a time to load up on a risk-asset position.”
Peter Sutherland, president, Henrietta Resources
The roughly 40 million barrels lost due to the storm help tighten the market
Brent futures for April, which expire on Friday, fell 74 cents to $66.14 per barrel, while the more actively traded May contract slipped by $1.08 to $65.03; WTI dropped $1.42 to $62.11 (although the contract was still on track to be up 4.8 percent on the week).
The losses did nothing to detract the analytical community from its bullish stance regarding a recovery from the pandemic, however: on Friday a Reuters poll showed that oil prices will stage a steady recovery this year as vaccines reach more people and speed an economic revival, with further impetus coming from Washington's proposed stimulus package and OPEC's output discipline.
The survey of 55 participants forecast that Brent would average $59.07 per barrel this year, up from last month’s $54.47 forecast and the biggest month-on-month upward revision in Reuters polls going back until at least 2016.
Norbert Ruecker, head of economics and next generation research at Julius Baer, pointed out that a recovery of travel and leisure activity thanks to the vaccines will mean "the supply side is unlikely to catch up on time, leaving the oil market in tightening mode for months to come.”
Meanwhile, an assessment of the Texas freeze showed that the total volume of oil lost was anywhere between 18 million and 40 million barrels, and while production is expected to mostly recover within the next few days, the outage "helps Saudi Arabia and its partners tremendously because it accelerates the path to inventory normalization,” according to Peter Sutherland, president of Henrietta Resources.
He added, “Concurrent drawdowns of both crude and refined products are a big tailwind heading into spring; it’s not just positive sentiment; the roughly 40 million barrels lost due to the storm help tighten the market.”