Americas News
Oil Continues Winning Streak On Demand Recovery And Production Restraint
Brent on Friday topped $72 per barrel for the first time since 2019, and analysts think $70-plus oil could be here to stay as demand recovery continues and supply discipline on the part of the Organization of the Petroleum Exporting Countries (OPEC) is exerted.
Trader optimism on Friday was due to factors that had been building earlier in the week, including OPEC agreeing on Tuesday to stick to agreed supply restraints, and news that nonfarm payrolls in the U.S. increased by 559,000 jobs last month.
Also boosting oil was a slowdown in talks between the U.S. and Iran over Tehran’s nuclear program.
Brent on Friday rose 58 cents to settle at $71.89 per barrel, after touching $72.17, its highest since May 2019; West Texas Intermediate rose 81 cents to settle at $69.62.
Stephen Brennock, oil analyst at PVM, said, “After much dilly-dallying, Brent appears to have found a new home above $70; summer and the reopening of the global economy is bullish for oil demand in the second half of the year.”
John Kemp, commodities analyst for Reuters, pointed out that U.S. shale restraint should also be credited for pushing up oil prices: on Friday he noted that while the number of rigs has already more than doubled from its cyclical low in August 2020, "Since the middle of February...the rate at which rigs have been added and total number employed have both started to lag behind previous recoveries."
He added, that "The number of active rigs has grown by an average of just 3.5 per week over the last 15 weeks, down from an average of 6.2 per week over the previous 20 weeks"; also, the number of rigs active last week (359) was far below the number in January 2020 (670) and April 2019 (825), when prices were at a similar level - meaning production is "likely to grow more slowly than previously expected in late 2021 and the first half of 2022."
More heartening news came on Friday in the form of data from Vortexa showing that Asia exported about 417,000 barrels per day (bpd) of jet fuel to Europe and North America combined in April-May, nearly 32 percent higher than the 316,000 bpd for February-March; also, jet fuel volumes in floating storage facilities have consistently stayed at zero for the past four weeks for the first time since March last year, according to Kpler.
Serena Huang, Asia lead analyst at Vortexa, said, “A pick-up in air travel in the U.S. and Europe amid falling [Covid] infection rates and possible relaxing of travel restrictions this summer, that contrasts against the weak fundamentals in Asia, is expected to support a widening of East-West jet fuel arbitrage in the near term.”
