Oil futures climbed Friday, on track to score big weekly gains as Brent crude prices pushed toward $60 a barrel, their highest level in over a year, boosted in part by ongoing signs of strong demand and production restraint by OPEC countries.
“Besides ‘soft’ factors such as increased demand from investors in view of the pronounced price buoyancy, rising stock markets and economic optimism, the physical market is also looking increasingly tight,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
West Texas Intermediate crude for March delivery rose 75 cents, or 1.3%, to $56.98 a barrel on the New York Mercantile Exchange, leaving front-month U.S. benchmark prices on track for an 9.1% weekly gain, FactSet data show.
April Brent crude the global benchmark, advanced 61 cents, or 1%, to $59.45 a barrel on ICE Futures Europe, up 8% for the week. Prices, based on the front-month contract, are on track to score a sixth straight session gain, the longest streak of climbs since the seven-session rise ended June 5, 2020.
Brent is testing the key $60 level and if successful, “it would mark the first time crude prices have traded above that level since COVID-19 first started to significantly impact prices,” said Robbie Fraser, manager of global research and analytics at Schneider Electric, in a note.
“The move speaks to the ongoing strength of a broader rally that has carried over from late 2020, largely pushed forward by broader market optimism and the start of successful vaccine deployment around the world,” he said. “While near-term headwinds have emerged, the longer-term optimism remains intact, bringing steady support.”
In an indication of robust demand, Weinberg noted that despite higher prices, Saudi Arabia won’t be granting discounts to Asian customers in March, and will leave price premiums in place despite expectations for a cut.
The analyst, however, argued that optimism over demand, which is shared by major oil producers, who look for demand to return to record 2019 levels as early next year, is overdone.
“We see such forecasts as ambitious and expect prices to correct in the coming months,” Weinberg wrote.
Oil futures had extended their streak of gains on Thursday, with U.S. prices up for a fourth consecutive session to mark their highest settlement in more than a year.
Oil prices remained underpinned by expectations that the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, will continue keeping a lid on output, as the global economy makes headway toward a recovery from the COVID-19 pandemic.
OPEC+ made no changes to output curbs at a monthly ministerial committee meeting Wednesday, and in a statement said its “optimistic for a year of recovery” in 2021.
Also on Nymex, March gasoline tacked on 0.7% to $1.6559 a gallon, trading around 6.7% higher for the week. March heating oil rose nearly 1% to $1.7167 a gallon, headed for a 7.4% weekly rise.
Natural-gas futures topped $3 per million British thermal units on an intraday basis so far in Friday dealings. It hasn’t settled above $3 since November.
March natural gas climbed 5.8 cents, or 2%, to $2.993 after trading as high as $3.057. For the week, prices are up by nearly 17%.
“Prices have rallied this week on the back of weather forecasts showing extremely cold temperatures across large portions of the U.S. throughout most of February, which is expected to strongly boost heating demand for gas, and swiftly draw down on storage levels,” said Christin Redmond, commodity analyst at Schneider Electric.
Data from the Energy Information Administration Thursday revealed a 192 billion-cubic-foot decline in weekly U.S. natural-gas supplies, which was 46 Bcf larger than the five-year average withdrawal for the same week, according to Redmond. “As a result, the storage surplus decreased to 7.9%.”