On Monday oil prices touched multi-month highs on anticipation that OPEC and allied producers may limit output at current levels in February as the coronavirus pandemic keeps worries about first-half demand elevated.
Brent crude features reached $53.17 a barrel, the highest since March 2020. U.S. West Texas Intermediate crude touched $49.71 a barrel, the highest since February 2020. March Brent crude futures were at $52.94 a barrel, up $1.14 or 2.2%, while February WTI crude futures rose 98 cents, or 2%, to $49.50 a barrel.
Energy Aspects analyst Virendra Chauhan said, broader macro momentum trends including a weaker dollar and investors positioning for a recovery in the oil sector this year could support oil prices. “Maybe there is some positive sentiment from OPEC+ looking to constrain supply in light of the virus rearing its ugly head in the west,” he added.
On Sunday, Mohammad Barkindo, Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), said that while crude demand is expected to rise by 5.9 million barrels per day (bpd) to 95.9 million bpd this year, the group spots plenty of downside demand risks in the first half of 2021. He said, “We are only beginning to emerge from a year of deep investment cuts, huge job losses and the worst crude oil demand destruction on record.”
In comparison with 2019, 2020 prices ended about 20% below its previous average, still recovering from the impact of global lockdown measures, which have slashed fuel demand, even though the world’s major producers agreed record output cuts. Last month OPEC and allied producers including Russia decided to raise output by 500,000 barrels per day in January, anticipating a boost in demand, and agreed to meet every month to review production. Analysts from Energy Aspects and RBC Capital said OPEC+ was likely to maintain January production levels in February.
RBC Capital’s Helima Croft said, “We think the producer group will opt to forgo any further production increases for February with COVID-19 cases continuing to climb and the slower-than-expected vaccine rollout.”
In the United States, crude oil production stayed under pressure from weak prices and tepid demand.