Americas News
Oil Ekes Out Minuscule Weekly Gain As Analytical Optimism Over Q2 Recovery Largely Ignored
A delayed response from traders regarding the massive U.S. stockpile drawdown earlier this week kicked in on Friday and was said to be the reason why oil prices rose to achieve a modest weekly gain.
However, the gains were capped by concerns over the slow Covid vaccine rollout and worries that the White House's $1.9 trillion pandemic relief package may not come quickly enough to benefit the market.
Brent for March rose 44 cents to $55.97 per barrel and the more active April contract was up 25 cents at $55.35; West Texas Intermediate rose 7 cents to $52.36.
Both front month Brent and WTI were on track for a weekly gain of slightly less than 1 percent.
Carsten Fritsch, analyst at Commerzbank, portrayed the crude market as treading water: “Restrictions on the demand side because of lockdowns are countered by a sufficient reduction in supply....preventing prices from falling or rising to any significant extent.”
Still, promising news about an impending increase in vaccinations along with numerous predictions of demand recovery this year have dominated headlines this week, and the latest analyst to offer cautious optimism on Friday was John Kemp, commodities analyst at Reuters.
He wrote, "U.S. petroleum inventories have continued to converge down towards the five-year average, a sign that oil market rebalancing remains on track, despite the resurgence of the coronavirus since the end of 2020."
He pointed out that stocks have fallen in 24 out of the last 30 weeks, and as a result petroleum inventories are now just 6 percent above the pre-pandemic five-year average for 2015-2019, down from a surplus of 14 percent at the end of June; also, "gasoline stocks are now almost exactly in line with the pre-epidemic five-year average, and while distillates are still in a surplus of 10 percent, that has fallen from almost 30 percent last June."
Kemp predicted that surpluses should be eliminated by the end of the second quarter or early in the third.
Similar optimism was expressed by other analysts in a Reuters poll published on Friday: of the 32 respondents who participated in the January and December polls, 28 raised their forecasts on the presumption of the vaccines leading to an uptick in economic and travel activity in the second half of 2021.
Faith in the vaccines was backed by several reports on Friday, one showing that new hospital admissions in the U.K. are down 44 percent from January 12 due to the inoculations, and the other revealing that just 0.04 percent of people in Israel caught Covid after two shots of the Pfizer serum.
