Oil prices continued their surge in the world’s major trading centers, fortified by shrinking stockpiles and continued investor optimism the market will strengthen in the coming months.
Brent crude, which was about $35 a barrel as recently as three months ago, surged to $59.04 on Thursday. Multiple trading gauges suggest a market that’s getting tighter, a move with global ramifications including boosting oil-rich economies and lifting gasoline prices at the pump.
Crude inventories at a key storage hub in the U.S. are now below their five-year average, and nationwide inventories continue to slump, an early indication that Saudi Arabia and allied producers are succeeding in their efforts to eliminate a glut. They’re also dropping in China, where oil major Royal Dutch Shell plc says its sales in January were up significantly on a year earlier, meaning that the world’s two most-important demand centers are experiencing a notable tightening.
While crude stockpiles are on the decline, there are still doubts about the recovery in oil demand as Covid-19 continues to keep a lid on global consumption. Saudi Arabia’s commitment to cutting output, however, has helped keep the market in balance as investors plow money into oil on the expectation of a full recovery later in the year.
“At the moment we are seeing pretty good oil prices,” Ben van Beurden, chief executive officer of Shell said in a Bloomberg TV interview. “Demand is not back where it was a year ago, but then again we see a lot of discipline also from OPEC+ and therefore the market is being held in balance quite well.”
- Brent for April settlement climbed 0.5 per cent to $58.73 as of 10:04 a.m. in London
- West Texas Intermediate for March delivery rose 0.7 per cent to $56.08 a barrel
Money is flooding back into the market. Total holdings of WTI crude futures are now at their highest level since July 2018, surpassing levels seen during the frenzied trading of April last year.
At the same time the crude futures curve continues to indicate strength. The so-called Dec.-Red-Dec. spread, a favoured trade of the world’s hedge funds, has topped $3 a barrel in recent days to reach its strongest level in a year
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