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Oil Fluctuates Near One-Year High With Global Supply Tightening

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These translations are done via Google Translate

By Alex Longley and Andres Guerra Luz

(Bloomberg) Oil extended its rally to a new one-year high as the market weighed a tightening global supply outlook against indications prices may be overextended.Futures in New York rose almost 1% to the highest intraday since January 2020 after falling earlier on Thursday. The oil futures curve continues to signal a tighter market, with Brent’s nearest contract trading at a nearly $6 a barrel premium to the contract one year out in a bullish structure known as backwardation. Still, technical indicators show crude hovering in overbought territory with the recent price surge.

“Looking forward in the market, we’re seeing a significant backwardation, which signals that there is an anticipation of an easing of virus restrictions coming,” said Gary Cunningham, director at Stamford, Connecticut-based Tradition Energy. “The market is looking toward more normal inventories heading into the summer, if we don’t see a flooding of markets.”

Oil trades at the highest intraday in over a year amid tightening global supplies

Oil is witnessing a stellar start to the year after Saudi Arabia’s deeper output cuts accelerated a rally triggered by Covid-19 vaccine breakthroughs. While there’s been a raft of calls by banks for oil prices to further rally, the market is facing a possible supply increase in April from OPEC+. The producer group meets next week to discuss its strategy with key members again differing on the path forward.

See also: Barclays Lifts Oil Price Forecasts on Subdued Supply Response

Sky Eye Measurement
Sky Eye Measurement

OPEC+ is “getting antsy now with prices being where they are,” said John Kilduff, a partner at Again Capital LLC. “They have a lot of spare capacity among themselves and the group, so it makes sense that they would want to respond.”

  • West Texas Intermediate crude for April delivery rose 37 cents to $63.59 a barrel at 11:58 a.m. in New York
  • Brent for April settlement added 11 cents to $67.15 a barrel

Shale explorers reported almost 6 million barrels of combined oil-output losses during the freeze last week. Occidental Petroleum Corp. and Pioneer Natural Resources Co., two of the largest producers in the Permian Basin, alone had a combined loss of about 3.8 million barrels, according to Bloomberg News calculations based on fourth-quarter earnings reports and calls.

Other oil-market news:
  • Exxon Mobil Corp. erased almost every drop of oil-sands crude from its books in a sweeping revision of worldwide reserves to depths never before seen in the company’s modern history.
  • The supertanker that became the one of most visible symbols of tension between the U.S. and Iran when it was seized off Gibraltar in 2019 has slipped quietly out of the Mediterranean Sea.
  • planned overhaul of how the world’s most important benchmark crude price is calculated has caused a surge in trading of swaps used to hedge North Sea oil prices.

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