Oil jumps on lower US weather-hit output

Singapore — Oil prices jumped by more than $1 on Tuesday, underpinned by optimism over Covid-19 vaccine rollouts and lower output as US supplies were slow to return after a deep freeze in Texas shut in crude production last week.

Shale oil producers in the southern US could take at least two weeks to restart the more than 2-million barrels a day of crude output that shut down because of cold weather, as frozen pipes and power supply interruptions slow their recovery, sources said.

Brent crude was up $1.10, or 1.7%, at $66.34 a barrel by 4.37am GMT, after earlier hitting a high of $66.79. US crude rose 92c, or 1.5%, to $62.62 a barrel, having reached a session high of $63. Both benchmarks have risen more than 2% on Tuesday after climbing nearly 4% in the previous session.

“The positive momentum continues in the oil complex, with investors unabashedly predisposed to a bullish view,” said Stephen Innes, chief global markets strategist at Axi in a note.

Goldman Sachs Commodities Research raised its Brent crude oil price forecasts by $10 for the second and third quarters of 2021, citing lower expected inventories, higher marginal costs to restart upstream activity and speculative inflows.

The Wall Street bank expects Brent prices to reach $70 a barrel in the second quarter from the $60 it predicted previously and $75 in the third quarter from $65 earlier.

Morgan Stanley expects Brent crude prices to climb to $70 a barrel in the third quarter on “signs of a much improved market” including prospects of a pickup in demand.

“It is hard not to be bullish with oil prices now that the deep freeze disruption practically guarantees the summer pickup in crude demand will erase whatever supply glut is left,” said Edward Moya, senior market analyst at Oanda in New York.

“The global oil demand is looking a lot better now that the Pfizer vaccine shows positive results after one dose, the UK sees the end of the pandemic ‘in sight’, and as hospital admissions and deaths continue to decline after peaking in early January.”

Stockpiles of US crude oil and refined products were likely to have declined last week, a preliminary Reuters poll showed on Monday, due to the cold weather disruption in Texas.

Reuters