Oil prices were all fired up at the first trading session of the week.
The unusual winter storm playing in key areas of the world’s largest producer of oil saw an estimated four million barrels per day of oil output shut down in Texas and other states, alongside 21 billion cubic feet of natural gas output.
Oil traders are going bullish on the black liquid hydrocarbon, over the unprecedented cold snap in leading American energy hub, Texas. Also giving crude oil bulls enough gas to stay at least above the $60 price level is the recent progress against the COVID-19 pandemic, in turn, raising hopes for energy demand recovery.
What you should know
- Most recent data retrieved from the Energy Information Administration reveal the United States is currently the world’s largest producer of oil, producing about 19.45 million barrels per day or 19% of the world’s total crude oil production in 2019.
- At press time, Brent crude futures rallied by 1.13% to $62.84 a barrel with the Brent crude contract turning over in February 21 to the May 21 contract.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave key insights on other macros weighing on oil prices at least for the near term amid high positivity prevailing in global financial markets
“What began as a power issue for a handful of US states quickly turned into a global supply shock for the oil markets. Still, the re-start of shut-in US production and news that the Biden administration is exploring diplomatic re-engagement with Iran have contributed to a cooling of oil prices, despite the bullish inventory data.
“But “the day after”, see oil prices nudging higher amid ongoing evidence of recovery in global demand, mostly good news on the Covid-19 trends and anticipation of a nearly 2 trillion US stimulus designed to get people working again quickly.”
What to expect
- The sharp surge in crude oil prices before OPEC+’s all-important meeting next month means the calculus for the OPEC+ alliance becomes more complicated.
- However, as oil output stays constrained, crude oil stockpiles are dropping and with COVID-19 vaccines promising a return towards normalcy at the end of the day, expectations continue to run high for oil markets.
- By Olumide Adesina