Texas makes a gradual return to the business to start the week. The oil price for the first trading day five follows an upward trajectory.
The projection of a tight supply and high demand turned out to be positive for crude. All benchmarks made significant additions for the day.
Similarly, Goldman Sachs’ projection added to the upbeat mood.
The financial services juggernaut raised expectations by $10 to $70 per barrel in the second quarter. It continued to raise it up to $75 per barrel in the third.
In the morning charts in Asia, Brent crude added 55 cents, still steady at $63.46 per barrel. The European benchmark managed to end last week with a 1% gain.
Moreover, the US benchmark followed suit after today’s 47-cent hike. The West Texas Intermediate nears to regain the $60 per barrel threshold after trading at $59.71 a barrel.
This is due to lower than anticipated crude inventories and high marginal cost.
Currently, supply continues to outweigh demand brought by several factors.
One is the unexpected cold spell in many states in the US which led to the shutdown of at least 4 million barrels per day in supply.
Similarly, the production of natural gas was also affected by adverse weather conditions, denting 21 million cubic feet in output.
According to experts, it will take several more days before oilfield crews could de-ice the valves. After this, they will need to restart the systems and finally resume oil and gas extraction and refinement.
With this condition, the output will likely stay lukewarm for the time being.
OPEC Production Eyed for Salvation
It is surprising how crude oil supply turned from foe to friend after a year into the pandemic.
With the recent projections on tight output and strong orders, experts are looking at OPEC production to keep the two entities balanced.
The association originally vowed to keep production curbs steady in the next months amid the still volatile environment.
Its de facto leader, Saudi Arabia, also self-imposed cuts by 1 million barrels per day as its commitment to stabilize prices.
However, experts are convinced that now is the time for reevaluation.
On the other hand, sources familiar with the matter noted that member states are looking at the bigger picture, beyond the Texas crisis.
After resuming production in the state, there is a big chance that oversupply might loom again as the overall macroeconomic environment remains uncertain.