Americas News
Texas Freeze Causes Mixed Crude Trading, But Analysts Continue Bullish Post-Covid Outlook
The sharp drop in U.S. crude output last week due to freezing weather in southern states, along with the U.S. Federal Reserve stating that interest rates would remain low for awhile, caused West Texas Intermediate on Thursday to eke out a modest price gain; however, Brent declined minimally.
Craig Erlam, senior analyst at OANDA, said, "With momentum appearing to slow a week before the next OPEC+ meeting, crude may be positioning for a small correction; there's still plenty of downside risks in the market and one of them is OPEC+ unity coming under strain in the coming months."
Erlam was referring to the Organization of the Petroleum Exporting Countries' meeting scheduled for March 4, during which time the cartel and its allies will discuss a modest easing of oil supply curbs from April given the recovery in prices.
WTI on Thursday ended 31 cents higher at $63.53, while Brent fell 16 cents to settle at $66.88 per barrel.
Both benchmarks hit their highest level since Jan. 2020.
The cold weather that caused production chaos also prompted Barclays to increase its 2021 Brent price outlook by $7 to $62 per barrel and WT by $6 to $58 per barrel: the bank on Thursday stated, "Colder-than-normal weather, especially in the southern states, has accelerated the normalization in inventories by disrupting output more than demand."
As for the gradual easing of the pandemic due to the vaccines and despite assurances from the scientific community that the existing batch and minor tweaks in future supply will effectively combat Covid variants, the analytical community is erring on the side of caution in its prognostications: Barclays added that it was cautious of "risks arising from more transmissible COVID-19 variants and elevated positioning" and warned that demand growth could materially slow if new virus strains affect the U.S.
Gary Cunningham, director at Tradition Energy, was far more optimistic in his assessment of things to come: he said on Thursday, "Looking forward in the market, we're seeing a significant backwardation, which signals that there is an anticipation of an easing of virus restrictions coming.
"The market is looking toward more normal inventories heading into the summer, if we don't see a flooding of markets."
Jay Hatfield, CEO at InfraCap, was equally upbeat: "By the summer, leisure travellers who haven't been able to travel who are now vaccinated," will be driving an uptick in demand; he added, "Supply is not going to respond like it has in the past," with U.S. production likely remaining restrained.
However, a radical reshaping of the energy industry due to the Covid lockdowns continues, the latest example being Exxon Mobil Corp., which erased almost all of its Canada oil sands crude from its books in a sweeping revision of worldwide reserves, reportedly to depths never before seen in the company's modern history.
