Abu Dhabi: Oil prices continue to remain steady at the low to the mid $40 range, with oil markets last week seeing an upward push in prices which briefly took Brent to $45 before settling down.
Prices on Friday saw Brent closing on $44.40 with West Texas Intermediate on $41.22, as both benchmarks recorded weekly highs.
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“Oil prices managed to settle higher last week even as markets sagged at the end of the week in response to a stronger dollar,” said Edward Bell, senior director, Market Economics at Emirates NBD. “Brent prices had managed to hit $45/barrel mid-week, their highest level since March but current prices around $44/b for Brent represent a 50 per cent retracement of the peak-to-trough move so far in 2020 and may be a substantial barrier if no further supportive fundamentals are forthcoming,” he added.
And with Opec and the International Energy Agency set to release their monthly outlook reports, oil markets will be keeping a close eye on their assessments, with both groups having improved their outlook for demand in their previous reports.
“Of note will be the outlook for supply heading into 2021 and whether Opec+ can maintain its schedule of tapering production cuts while other producers are out of the market,” said Bell. “Last month the IEA revised its demand expectations for 2020 up by 400k barrel per day—but still anticipated a decline of almost 8m bpd year on year,” he added.
“The improvement in economic conditions across much of the developed world may prompt further upward revisions to demand forecasts for 2020.”
With COVID-19 numbers continuing to go up along with worries of a second pandemic wave, last week’s oil rally is unlikely to remain sustainable according to Bjornar Tonhaugen, head of oil markets at Rystad Energy.
“Such price increase may have been out of proportion, taking into account that oil production started rising this week, as Opec+ started bringing back a part of its curtailed million barrels.
“And that while Covid-19 keeps on expanding, not only in the US, Brazil and India, where it is full-blown now, but also at countries that thought they had contained it in Europe,” he added.
“We are a bit conservative on the short-term and believe that the market is not ready to sustain another large price increase during the summer, with a recovery coming only later in the year, together with demand.”