Weekly Review

The markets posted their worst week since mid-March amid concerns that rising global coronavirus cases slowed economic recovery. West Texas Intermediate futures ended the week down 3.5% to close at $59.32. Brent closed at $62.95. With the OPEC+ countries planning to raise output by some 2 million b/d in May and June, markets now are focused on whether the demand recovery will be enough to absorb growing supplies. While consumption is climbing in India and the US, rising virus cases and stricter travel limits in Europe are muddying the forecast and putting pressure on crude prices.

West Texas Intermediate and Brent crude futures posted solid increases on Thursday after OPEC+ decided to increase production slowly. WTI for May delivery gained $2.29 to $61.45 per barrel. June Brent futures closed at $64.86/barrel, up $2.12. Oil futures received a boost from the OPEC+ group of significant producers’ decision to increase output from May to July.

Prices were volatile last week as the grounding of the “Ever Given” container ship in the Suez Canal set off a chain of events that wreaked havoc on global trade. On Tuesday last week, Brent crude’s price plunged to $60.86 per barrel from $69.63 per barrel on March 11th. The price had rebounded to nearly $64 per barrel by Wednesday. The dramatic price fluctuations are attributable to various events, including US oil inventory figures, another round of lockdowns in the EU, AstraZeneca vaccine safety and efficacy concerns, and the vessel stuck in the Suez Canal. On Friday, the markets closed essentially unchanged for the week at $60.97 in New York and $64.57 in London. Prices are up roughly 25% this year, and there’s confidence in the longer-term outlook as vaccination rates climb, and OPEC+ keeps supply in check.

On Thursday, prices suffered their biggest weekly fall since October as signs of flagging demand in key markets halted a strong rally. International benchmark Brent crude ended the week down almost 7%, settling at $64.53 a barrel. West Texas Intermediate, the US marker, fell by a similar margin to $61.42 a barrel. Oil futures are still up well over 20% since the start of the year, with the world’s largest oil producers reining in supply and travel around the world still slow.

Prices settled near $70 a barrel on Friday, supported by production cuts by major oil producers and optimism about a demand recovery in the second half of the year. Benchmark Brent settled at $69.22 a barrel. US West Texas Intermediate crude ended at $65.61 a barrel. Brent and US crude finished the week roughly flat after prices touched a 13-month high on Monday, following seven straight weeks of gains.

Futures rallied to the highest in nearly two years in New York after OPEC+ shocked markets with a decision to keep supply limited as the global economy starts to recover from a pandemic-driven slump. US benchmark crude futures topped $66 a barrel on Friday, while its international counterpart Brent neared the $70 level. Major banks upgraded price forecasts, with some calls for oil reaching north of $100 next year. Crude has soared more than 30% this year, with OPEC+’s output restraint holding the market over until a full-fledged comeback in consumption. The group’s latest decision represents Riyadh’s victory, which has advocated for tight curbs to keep prices supported.

Crude oil futures finished the week sharply lower as a stronger dollar and expectations of rising global supply pulled prices off a 13-month high of over $67 a barrel, seen earlier last week. WTI settled Friday at $61.50 and London at $66.13. US crude futures were up nearly 22% in February with expectations of shrinking supplies and a further rebound in consumption as economies worldwide begin to reopen. However, the market is facing a possible supply increase in April from OPEC+ and variants of Covid-19 continue to spread.

The severe winter storm that swept through the United States last week likely shut in between 2 million and 4 million b/d of US crude oil production, IHS Markit said in an analysis. The freeze, which started in Texas and moved east across much of the US, has also impacted almost 6 million b/d of refining capacity, including 5.2 million b/d along the Gulf Coast and 730,000 b/d in the Midwest. Issues with power outages, frozen pipes, roads, and personnel have resulted in a large volume of US oil and natural gas production being shut in. This storm is turning into a global problem. According to Citi estimates, the total lost US production by early March could reach 16 million barrels. Others, however, say the lost production could be twice as high.

Prices in London climbed for a fourth straight week as efforts to clear an oil surplus are supporting oil prices until demand comes back to pre-pandemic levels. Brent futures surged the most since early January on Friday, while West Texas Intermediate crude flirted with $60/barrel for the first time in more than a year. Oil demand outlooks improved amid signs of progress on US COVID-19 vaccination distribution and Washington’s coronavirus stimulus package.

Brent closed on Friday at $59.44—close to the benchmark’s $60 psychological threshold. Last week at this time, the spot price for Brent was just $55.04. The near $5 gain is due to a combination of factors, including a large crude oil inventory decrease in the US, continuing OPEC+ production restraint, Aramco’s price hike to crude for Europe, US traders drunk on stimulus chatter, and whispers of an overall tightening oil market. But can this uptrend last amid lockdown extensions and oil demand that just isn’t there yet?