Colonial, Covid Recoveries Boost Oil Prices As Saudi's Move To Growth Mode

Meanwhile, the Grow website says get set for soaring oil prices: File Image/Pixabay

Yet again offsetting fears that rising Covid rates in India would ruin demand in that country, oil prices on Monday rose modestly, relatively unaffected by the ransomware group DarkSide closing the Colonial Pipeline in the U.S.

After it was learned that Colonial expects to substantially restore operational service by the end of the week, Brent rose 9 cents to $68.37 per barrel by 18:13 GMT, while West Texas Intermediate  rose 10 cents to $65.00.

Carsten Fritsch, analyst at Commerzbank, noted,  "If the pipelines were to remain out of action for any length of time, this would have far-reaching effects on the oil market not only in the U.S., but also in Europe.

"That said, it is currently assumed that the disruption to the pipelines will be resolved in a matter of days, so the impact should be limited."

Despite the tumult caused by hackers and the novel coronavirus, hedge funds boosted their position in petroleum for the fourth week running, to the equivalent of 40 million barrels; John Kemp, commodities analyst for Reuters, stated that "The rate of hedge fund buying is accelerating and widening to include both crude and refined fuels, consistent with growing confidence about an economic recovery and cyclical upturn in petroleum consumption."

Kemp added that the number of rigs drilling for oil in the U.S. has flattened out, "implying a slower increase in shale production over the second half of the year, helping support prices at a higher level."

Supporting Kemp's view of bullish demand on Monday was a Travelzoo survey showing that searches for Florida's Key West and Sarasota were up more than 200 percent from 2019; the Grow website suggested that "Pent-up travel demand will likely send prices soaring for summer travel this year."

Meanwhile, the world's gradual emergence from the pandemic has created what Bloomberg referred to on Monday as "A split-screen economy" for Saudi Arabia, because the kingdom's non-oil economy (the engine of job creation) rebounded in the first quarter to pre-pandemic levels, even as the overall economy was dragged into contraction by oil-production cuts.

It was also noted that consumer spending is rebounding in Saudi Arabia and officials plan to partially reopen  borders on May 17; the International Monetary Fund expects the economy to grow 2.1 percent this year after shrinking 4.1 percent in 2020.