But analysts insist that short-term pain is still likely: File Image/Pixabay
The long-standing contradictions driving oil trading were revealed in full on Thursday as concerns about government Covid lockdowns harming demand clashed with several developments boding well for demand - and the result being a modest price increase for crude.
Brent rose 36 cents, or 0.6 percent, to settle at $56.42 per barrel, while West Texas Intermediate ended 66 cents, or 1.3 percent, higher at $53.57.
Oil was buoyed by hopes of increased oil demand via a huge Covid-19 relief package unveiled by President-elect Joe Biden, as well as the U.S. dollar index slumping due to vows that the U.S. central bank will not raise interest rates anytime soon (a weaker greenback makes dollar-denominated oil cheaper for holders of foreign currencies).
Jim Ritterbusch, president, Ritterbusch and Associates
Oil specific fundamentals still appear supportive enough
Most significantly, Thursday's gains were informed by China's total crude oil imports rising 7.3 percent in 2020, with record arrivals in the second and third quarters as refineries expanded operations and low prices encouraged stockpiling, according to customs data.
Jim Ritterbusch, president of Ritterbusch and Associates, said, "With energy values strengthening as the dollar weakened today, the oil market was able to advance late session in sympathy with stronger equities.
"Oil specific fundamentals still appear supportive enough to push the complex into new high territory within the next couple of trading sessions."
Negative sentiment was best summarized on Thursday by Bjornar Tonhaugen, oil market analyst at Rystad: he remarked, "Seeing COVID-19 infections rise in China by the largest margins in a long time is alarming for the market and, combined with strict ongoing lockdowns in Europe, may affect oil demand much more than initially anticipated in the first quarter."
But for the time being, cautious optimism prevails within analytical circles: also on Thursday, the Organization of the Petroleum Exporting Countries (OPEC) stated that U.S. total oil supply will rise by 370,000 barrels per day (bpd) in 2021 to 17.99 million bpd, up 71,000 bpd from the cartel's previous monthly forecast, and due to its policy of cutting output.
OPEC left its forecast for world demand unchanged, saying oil use will rise by 5.90 million bpd this year to 95.91 million bpd, following a record 9.75 million bpd contraction last year due to the pandemic.
However, for the short term and until the vaccines are thoroughly distributed throughout the globe, the market will undeniably remain choppy, as evidenced by Bloomberg reporting that road use in the U.K., France, Italy and Spain was down 37 percent last week compared with pre-virus levels; Rystad says the slump so far this month translates to a drop of about 1.76 million bpd in consumption.