Oil Ticks Up Amid Covid Concerns, But Saudis Predict Strong 2021 Second Half

Meanwhile, ThinkMarkets warns of the impact of rising output:V File Image/Pixabay

Although the resumption of Covid vaccination programs in Europe mollified crude traders concerned about demand recovery in that part of the world, their ongoing jitters regarding the pandemic capped gains for two key benchmarks on Monday.

Brent settled up 9 cents at $64.62 per barrel, while West Texas Intermediate for delivery in May rose 12 cents at $61.56 per barrel.

ING summarized the situation by stating in a note, “Oil [had] its worst week this year as concerns grow over a flaring up in COVID-19 cases across Europe; this comes at a time when there are clear signs of weakness in the physical oil market.”

John Kemp, commodities analyst at Reuters, said part of the problem was that hedge fund positioning in oil recently became directionless: "With production rising, consumption seen weaker, and no new fund buying to steady the market, oil prices were primed for a correction – which arrived with a 7 percent one-day decline on March 18."

Still, the smart money remains on a substantial economic recovery in the second half of this year as Europe slowly catches up to the U.S., the UK, Israel, and other countries whose aggressive vaccination programs are resulting in plummeting Covid rates: Amin Nasser, chief executive of Saudi Aramco, said global oil demand was on track to reach 99 million barrels per day (bpd) by the end of 2021.

As for the state of Saudi Aramco, it reported a 44 percent collapse in full year earnings on Monday due to the Covid lockdowns but still declared a dividend of $75 billion and remains one of the world’s most profitable companies.

Fawad Razaqzada, market analyst at ThinkMarkets was similarly upbeat, if more guardedly so: “While I think demand is going to improve further as more economies ease travel restrictions in the coming months, the impact of this will be offset to some degree by rising oil supply: OPEC+ will be easing supply restrictions slowly, while U.S. shale production is likely to ramp up due to the attractive oil prices again."

For the time being though, the Organization of the Petroleum Exporting Countries' compliance with existing output cuts reached an impressive 113 percent in February.