Price of oil inches closer to $60
The price of oil soared closer to $60 a barrel Thursday morning on the back of shrinking U.S. crude stockpiles and adherence by OPEC and its allies to production cuts.
Global benchmark Brent crude climbed past $59 a barrel before settling at $58.84 during a choppy session. West Texas Intermediate, the U.S. benchmark, jumped past $56 to settle at 56.23. During the trading day, both reached prices not seen in more than a year, before demand collapsed amid the coronavirus pandemic. While demand continues to lag, analysts remain confident in crude’s recovery.
“The macro setup is pretty bullish, even if you’re not seeing demand recover particularly quickly,” said Matt Sallee, portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets.
Key to the recent price spike is diminishing stockpiles. OPEC and its allies extended a production pause for two months, with Saudi Arabia taking the unusual step of cutting 1 million barrels a day in February and March while most of the rest of the group keeps output steady.
“It looks like, at every turn, Saudi seems to want to support the market,” said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures. “If demand really picks up, we could be short oil pretty quickly, because U.S. production isn’t going to come back fast.”
U.S. crude inventories decreased by 1 million barrels last week to 475.7 million barrels for the week ended Jan. 29 from 476.7 million barrels the previous week, the Energy Department said.
“The oil market is living its best days since COVID-19 became a pandemic as oil supply and crude storage filling rates, which were of major concern during 2020, are now at levels most traders are feeling comfortable with,” said Bjor
nar Tonhaugen, head of oil markets for Norwegian energy research firm Rystad.
Still, with the decrease, the U.S. has about 4 percent more crude on hand than the five-year average for this time of year, the Energy Information Administration said.
Gasoline inventories increased
by 4.5 million barrels last week and are about 1 percent below the five-year average for this time of year, signaling that demand continues to be soft. Jet fuel inventories rose by 1.8 million barrels last week as the airline industry continues to battle the effects of the pandemic’s travel restrictions.
Refineries took in an average of 14.6 million barrels a day last week, some 80,000 barrels per day less than the previous period, the EIA said. The decrease had refineries operating at about 82 percent of capacity. Over the past four weeks, refineries have produced 7.8 million barrels a day of gasoline, about 10.6 percent less than during the same period last year.