Even as Baker Hughes reported a rise in the number of active oil rigs in the United States on Friday, oil prices continued to rise on Friday afternoon.
At 4:19 p.m. EDT, WTI crude was up 1.32% the same day at $ 56.97. Brent was still up more than 1% that day, at $ 59.44 – dangerously close to the $ 60 psychological threshold for the benchmark.
Last week at this point, the bargain price for Brent was just $ 55.04. The nearly $ 5 gain is due to a combination of factors including a major drop in U.S. crude oil inventory, ongoing OPEC + production restriction, Aramco’s crude oil price hike for Europe, U.S. traders drunk with incentives and whispers about an overall tightening of the oil market.
These are indeed bullish signals. But could this uptrend last amid lockdown expansions and oil demand that just isn’t there yet?
When a stimulus deal is finalized, oil prices are expected to rise – this is certainly still bullish. But on the bearish side, demand for oil is still lagging, and some analysts have been arguing for a full recovery in demand for years – if ever.
For example, the EIA does not see a full recovery of energy consumption in the US over the next eight years. That’s certainly on the bearish side.
Will OPEC be able to stop the supply until then? Can they afford not to? Russia is still eager to ramp up its oil production as it doesn’t want to open the door to US shale producers. For now, Saudi Arabia is happy to take one for the team, resigned to curb production so that others in the group will continue with at least some of the cuts. For now, OPEC’s actions are optimistic.
The EIA sees US oil production set new records, but not until 2023.
However, Goldman Sachs is still bullish, calling for $ 65 Brent mid-year, with WTI in the low $ 60.
Rystad Energy, however, sees a price correction on the horizon.
“Many technical indicators are flashing red, so a price correction would not be surprising anytime soon,” Rystad said Friday, according to Oilfield Technology.
By Julianne Geiger for Oilprice.com
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