Oil Hits Highest in More Than a Year With Global Supply Draining
An oil pumping jack in an oil field in Russia. (Photographer: Andrey Rudakov/Bloomberg)

Oil Hits Highest in More Than a Year With Global Supply Draining

Oil climbed to the highest in more than a year amid optimism of swiftly depleting global oil inventories.

Futures in New York closed 0.5% higher on Thursday. The oil futures curve continues to signal a tighter market. U.S. crude inventories are near the lowest levels in about a year, while exports of five key crudes in the North Sea fields are seen slumping in April. As a result, crude timespreads are strengthening in a bullish structure known as backwardation.

“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 Hits Highest in More Than a Year With Global Supply Draining

U.S. crude futures are up nearly 22% in February with expectations of shrinking supplies and as economies worldwide begin to reopen, signaling a further rebound in consumption. Still, 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 differing on the path forward.

See also: North Sea Oil Field Work to Cut Supply From Already Tight Market

“By the summer, leisure travelers who haven’t been able to travel who are now vaccinated,” will be driving an uptick in demand, said Jay Hatfield, CEO at InfraCap in New York. “Supply is not going to respond like it has in the past,” with U.S. production likely remaining restrained.

  • West Texas Intermediate crude for April delivery gained 31 cents to settle at $63.53 a barrel, the highest since May 2019
  • Brent for April settlement dipped 16 cents to end the session at $66.88 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. Meanwhile, refineries along the U.S. Gulf Coast are in the process of restarting, though some plants are facing lengthy repairs to key processing units.

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.
  • A 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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