Oil in New York climbed to a new 10-month high as the dollar declined, increasing the appeal of commodities priced in the currency.
Futures rose 1.5 per cent to above $53 a barrel, to the highest since February 2020. Prices have climbed in recent days after promises of unilateral output cuts from Saudi Arabia spurred a further rally.
Oil has surged more than 45 per cent since the end of October, boosted by COVID-19 vaccine breakthroughs and commitments from OPEC and its allies to curb oil output. Recent Democrat victories in U.S. elections have also spurred expectations of economic stimulus, while commodity index rebalancing is also expected to buoy prices this week.
“Oil prices are rising again after a brief timeout,” said Eugen Weinberg, head of commodities research at Commerzbank AG. “On the demand side, hopes of economic recovery and the massive fiscal stimuli being taken by governments are lending support.”
- West Texas Intermediate for February delivery rose 78 cents to $53.03 a barrel at 10:30 a.m. London time
- Earlier, prices touched $53.26 intraday, the highest since February
- Brent for March settlement gained 1.6 per cent to $56.53
Investors are also weighing the prospect of higher supply from North America. A “big chunk” of U.S. shale is profitable at current oil prices, but drillers should be aware of crude’s declining share in the future global energy mix, International Energy Agency executive director Fatih Birol said in a Bloomberg television interview.
Many shale producers will be able to increase production this year and in 2022, and in the short term “we will need shale oil from the United States to fill the gap” in the supply-demand oil balance, Birol said. However, shale companies “shouldn’t underestimate” the electrification of the transportation sector, he added.
© 2021 Bloomberg L.P.