Oil surges to one-year high in New York as rally powers on

Oil surged again, rising above $55 a barrel in New York to its highest level in a year as the virus-recovery rally continued.

West Texas Intermediate futures rose as much as 2.8 per cent, while the global Brent benchmark is now back within sight of $60. Crude has been climbing steadily since late last year as coronavirus vaccines and producers’ supply curbs boost expectations of a tighter market. An OPEC+ panel sees stockpiles falling below their five-year average in the second quarter, a delegate said Tuesday.

There are pockets of physical-market strength, too. Royal Dutch Shell plc raided the North Sea market Monday, buying the most benchmark-grade cargoes in a single day in 10 years in the S&P Global Platts pricing window. The oil major also bid for a further seven shipments in a flurry of activity.

Alongside that move, the structure of the futures curve has been firming, adding to the bullish outlook. Nearby Brent timespreads are trading in their biggest backwardation in a year, suggesting supply tightness.

Oil still faces bumpy short-term demand amid concern that new virus variants will lead to more lockdowns, while vaccine rollouts are slower than expected in some countries. Still, with cold weather sweeping across the U.S. and much of Wall Street anticipating inventory draws in the coming months, prices continue to surge higher.

The oil market is “supported by the combination of tightening fundamentals, as seen through the rising backwardation and the renewed risk appetite in the U.S. stock market,” said Ole Hansen, head of commodities research at Saxo Bank A/S.

Prices

  • WTI for March delivery advanced 2.4 per cent to $54.83 a barrel as of 8:38 a.m. in New York, after earlier touching $55.02
  • Brent for April settlement also rose 2.4 per cent to trade at $57.69

OPEC may be adding less supply to the market than expected. While the group raised crude production as planned in January, the monthly change was barely two-thirds of the scheduled amount as increases by OPEC’s Persian Gulf exporters were offset by disruptions in Nigeria and Libya.

© 2021 Bloomberg L.P.

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