Even with Baker Hughes reporting an increase in the number of active drilling rigs in the United States on Friday, oil prices continued to record gains on Friday afternoon.
At 4:19 pm EDT, WTI oil was still up 1.32% for the day, at $ 56.97. Brent was still up 1% on the day, at $ 59.44 – dangerously close to the psychological limit of $ 60 for the benchmark.
Right now, last week, Brent’s cash price was just $ 55.04. The gain of almost US $ 5 is due to a combination of factors, including a large reduction in the United States crude oil stock, continued restriction of OPEC + production, an increase in Aramco’s price for oil in Europe, intoxicated American traders with stimulus talks and rumors of a general tightening of the oil market.
Those are bullish signs, in fact. But can this upward trend last amid extensions of blockage and demand for oil that does not yet exist?
When a stimulus agreement is finalized, oil prices are expected to jump – that is certainly still bullish. But on the downside, demand for oil is still lagging behind, and some analysts are not asking for a full recovery in demand for years – or ever.
The EIA, for example, does not expect a full recovery in energy consumption in the United States for another eight years. This is certainly on the low side.
Will OPEC be able to contain the flood of supply until that moment? Can they afford not to? Russia is still eager to increase its oil production, fearing to open its doors to US shale producers. For now, Saudi Arabia is happy to bring one to the team, has resigned to curb production so that others in the group can continue with at least some of the cuts. For now, OPEC’s shares are optimistic.
The EIA sees U.S. oil production setting new records, but not before 2023.
Goldman Sachs, however, is still optimistic, paying for $ 65 Brent in the middle of the year, with WTI down $ 60.
Rystad Energy, however, sees a price correction on the horizon.
“Many technical indicators are flashing red, so a price correction would soon be unsurprising,” said Rystad on Friday, according to Oilfield Technology.
By Julianne Geiger for Oilprice.com
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