Crude Oil Prices Reach 10-Month High

  • “The first quarter of the year will be worse than expected because of [renewed European] lockdowns everywhere.”
  • Analysts said that crude oil prices were partly affected by the stock market, which strengthened slightly after falling back on Monday
  • Investors are still debating whether the sharp rise in crude oil prices since the end of last year will prompt US shale oil producers to rapidly increase production.

The rebound of the US dollar lost its momentum to boost commodity prices priced in US dollars. At the same time, the rise in the stock market also boosted energy prices. Crude oil futures resumed their rise and ended up collectively higher. New York crude oil rose 1.8% to close at $53.21, for six consecutive trading gains, and hit its highest level since February 21.

Petroleum, also called crude oil or just oil, is a naturally occurring, yellowish-black liquid found in geological formations beneath the Earth’s surface. It is commonly refined into various types of fuels.

“The first quarter of the year will be worse than expected because of [renewed European] lockdowns everywhere,” said Jean-François Robin, head of global markets research at Natixis. “We were expecting a bit [of a] better start to the year.”

West Texas Intermediate crude oil for February delivery on the New York Mercantile Exchange rose 96 cents, to close at $53.21 a barrel, an increase of 1.8%, the sixth consecutive trading day of gains.

The global benchmark March Brent crude oil rose 92 cents, to close at $56.58 per barrel or 1.7%. Both benchmark stock indexes hit their highest levels since February 21.

Analysts said that crude oil prices were partly affected by the stock market, which strengthened slightly after falling back on Monday. Oanda senior market analyst Edward Moya said in a report:

“Today, crude oil prices are following the overall trend of the market’s risk assets. Energy traders seem to be just looking for a reason to buy. Earlier oil prices rose due to a weaker dollar, but the downward momentum was under control.”

The Intercontinental Exchange Dollar Index, which tracks the U.S. dollar against six major currencies, fell 0.4% after rebounding from a two-and-a-half-year low late last week and Monday. A weaker U.S. dollar is seen as beneficial to dollar-denominated commodities, making them cheaper for overseas buyers.

Richard Saperstein, chief investment officer at Treasury Partners, said that “if we start seeing further surges in hospitalizations and Covid-related deaths, I am concerned that market enthusiasm will turn in the short term.”

“In the near term, there’s a very real and present danger that the US could double-dip in the first quarter,” he added. “We saw the first signs of that with the jobs report last week.”

Analysts said that Saudi Arabia’s decision last week to cut oil production by 1 million barrels per day in February and March will help alleviate concerns about the continued increase in new coronavirus cases and the impact of stricter lockdowns on-demand supporting crude oil.

Stocks

At the same time, investors are still debating whether the sharp rise in crude oil prices since the end of last year will prompt US shale oil producers to rapidly increase production.

However, the January short-term energy outlook released by the U.S. Energy Information Administration on Tuesday predicts that U.S. oil production this year will fall to 11.1 million barrels per day, the same as previous estimates.

In 2020, daily production will drop from a record 12.2 million barrels per day in 2019 to 11.3 million barrels. The agency expects that by 2022 oil production will rise to 11.5 million barrels per day.

In 2021, OPEC’s average daily production is expected to reach 27.2 million barrels, higher than the 2020 estimated 25.6 million barrels.

Among other energy products traded on the exchange, February natural gas futures rose 0.6%, or 0.2%, to close at $2.753 per million British Thermal Units. February gasoline futures rose 3.22 cents, or 2.1%, to close at $1.5530 per gallon, and February heating oil rose 2.32 cents, or 1.5%, to close at $1.5967 per gallon.

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George Mtimba

George clarifies how the news is changing the world, how world news trends affect you. Also, George is a professional journalist, a freelance news reporter and writer who is passionate with current world news.

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