Americas News
Oil Prices Rise Again On Slew Of Bullish Demand Recovery Numbers
The dichotomy between fearful Covid news headlines and actual global economic recovery compelled crude traders on Thursday to once again be swayed by the latter, and thanks to strong U.S. growth and more signs of healthy demand, oil prices rose to six-week highs.
Brent rose $1.29 to settle at $68.56 per barrel, while West Texas Intermediate rose $1.15 to end at $65.01; both benchmarks were up for a third consecutive day to their highest closes since March 15.
While media made much out of rising Covid rates in India and Brazil, traders focused on U.S. economic growth accelerating in the first quarter due partly to government aid as well as vaccine performance; the recovery is expected to be the strongest performance this year in nearly four decades.
Additionally, New York City aims to fully reopen on July 1 after more than a year of closures and restrictions.
In Europe, where vaccination programs have been ramped up from their original snail's pace, countries are planning to relax lockdowns, and this caused Bjornar Tonhaugen, head of oil markets at Rystad Energy, to state, "Summer season is a synonym for driving season and drivers in the United States, China, and the United Kingdom are about to start consuming more fuel, a development the market believes will make up for India's Covid-19 downturn."
It was also reported on Thursday that Europe's major energy companies, including BP, Equinor, and Total, have achieved big increases in first-quarter earnings, an indication they have put the worst of the pandemic behind them (Total in fact is said to be poised to perform its first major acquisition of U.S. production assets with the $1 billion purchase of Hunt Oil Co.'s Permian Basin oil wells).
Royal Dutch Shell reported adjusted earnings of $3.2 billion for the three months through to the end of March, compared with $2.9 billion over the same period a year earlier; Shell also raised its dividend by around 4 percent.
There is also evidence that capital is being preserved to allow for an acceleration of new energy investment.
As for the prospect of increased drilling in the post-pandemic world, Doug Suttles, CEO of Ovintiv Inc., said U.S. shale producers will keep output in check even though prices are nearing a sweet spot of $70 per barrel.
Finally, Bank of America Global Research said in a report that higher daily U.S. airport foot traffic and airlines adding more flights point to a summer travel season that may be "significantly more robust" than is being priced in.
It stated, "We believe these signals affirm that an eventual recovery in demand is a question of 'when' not 'if,' with risks that the pace may be quickening even versus very bullish GDP growth estimates."
