Americas News
Oil Achieves Two Month High As Supply Glut Clearance Met With Cheers And Anxiety
A U.S. government report showing domestic crude inventories falling to their lowest since late February lent support to the contention that the world has largely worked off its Covid lockdown induced surplus - and as a result, oil prices on Wednesday rose to an eight-week high.
Brent rose 77 cents, or 1.1 percent, to settle at $69.32 per barrel (the highest close since March 11), while West Texas Intermediate rose 80 cents, or 1.2 percent, to settle at $66.08.
However, the cyber attack on the Colonial Pipeline continued to be a source of worry, with panic buying pushing retail gasoline prices above $3 per gallon for the first time in more than six years and supplies at some terminals in the U.S. Northeast being wiped out.
Bill O'Grady, executive vice president at Confluence Investment Management, said, "Even if everything is fixed at this second, we're probably still looking at a couple of weeks of trouble, [and] that runs us right into Memorial Day."
Thus, an Energy Information Report showing crude reductions that would normally be flat out good news also became a source of anxiety, as gasoline inventories were at their lowest since 2016 for this time of year in the Lower Atlantic, a region most reliant on the Colonial Pipeline.
The International Energy Agency agreed that the supply glut created by the Covid lockdowns has cleared, and although Toril Bosoni, head of the IEA's oil markets and industry division, said that demand recovery in the U.S. and Europe during the first quarter was softer than expected and India's Covid woes are posing demand problems, the agency still expects "a very strong recovery" in the second half of 2021.
For his part, Damien Courvalin, head of energy research at Goldman Sachs told Bloomberg on Wednesday that in a matter of months oil demand will be so great that "supply just won't be able to keep up" and that the Organization of the Petroleum Countries (OPEC) "will need to bring more barrels to market for the rest of this year and next year."
Meanwhile, oil gained support from reports that the U.K.'s economy grew more strongly than expected in March, and U.S. consumer prices increased in April by the most in nearly 12 years, as booming demand in a reopening economy strained supply.
