U.S. oil price hits $50 for first time since last February

U.S. oil price hits $50 for first time since last February

Oil futures rose Tuesday, with U.S. prices touching $50 a barrel for the first time since February, after Iran seized a South Korean ship and the Organization of the Petroleum Exporting Countries and its allies extended talks over whether to further ease production cuts.

OPEC and its Russia-led allies, a group known as OPEC+, deadlocked Monday over whether to further relax output curbs in February. Talks continued Tuesday.

The latest talks “host tough negotiations and the day is a crunch moment for the alliance, with the risk of Russia diverting from a common line, which has been in place during 2021,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in emailed commentary.

Saudi Arabia and most of the broader alliance backed holding off on any output increases, citing uncertainty over the toll a renewed surge in COVID-19 cases and a more contagious variant of the disease could have on demand, while Moscow called for allowing output to rise by another 500,000 barrels a day in February, as agreed in a December meeting, The Wall Street Journal reported.

Russia has worried about losing market share. Russia and Saudi Arabia have clashed before over output policy, prompting a devastating price war last spring that flooded the world with crude just as the pandemic brought the global economy to a near halt.

“OPEC+ not agreeing to resume stable levels of production in February has…shaken traders, who expected a smoother meeting this time,” said Tonhaugen. And the oil market on Monday “woke up from its holiday nirvana and corrected high oil prices that the current oil demand situation does not justify.”

“Any decision by OPEC+ to not increase output in February will be seen as positive by the market,” he added.

Meanwhile, “away from the OPEC+ poker table, the oil market found a helping hand in the Middle East, where tensions are flaring again,” said Tonhaugen.

Iran on Monday started enriching uranium up to 20% at an underground facility and seized a South Korean-flagged oil tanker in the Strait of Hormuz.

“Iran seizing a tanker creates, again, instability in the region and questions are raised again over the reliability of the oil transport Gulf sea roads,” Tonhaugen said. “If the situation doesn’t deescalate quickly, oil prices will benefit from the unpredictability.”

Against that backdrop, West Texas Intermediate crude for February delivery


rose $2.01, or 4.2%, to $49.63 a barrel on the New York Mercantile Exchange after posting a loss of nearly 1.9% Monday. Prices climbed to as high as $50.05, their highest level since February 2020.

March Brent crude
the global benchmark, gained $1.76, or 3.4%, to $52.85 a barrel on ICE Futures Europe.

“Iran’s decision to continue its uranium enrichment program is initially likely to rule out any possibility of U.S. sanctions being lifted in the near future by President-elect [Joe] Biden, meaning that Iran will not return to the export market for now,” wrote analysts at Commerzbank, in a note.

Back on Nymex, prices for petroleum products moved higher along with oil. February gasoline

rose 4% to $1.4284 a gallon and February heating oil

added 3.3% to $1.5105 a gallon.

The Energy Information Administration will release its weekly data on U.S. petroleum supplies on Wednesday. Analysts at IHS Markit forecast a decline of 1.2 million barrels in crude supplies for the week ended Jan. 1. They also expect inventory increases of 1.4 million for gasoline and 2.2 million for distillates.

Natural-gas futures were up strongly Tuesday amid forecasts for some cooler weather in parts of the U.S. that may boost demand for the heating fuel.

February natural gas

rose 5.1% to $2.713 per million British thermal units following a rise of nearly 1.7% on Monday.

Source link


Please enter your comment!
Please enter your name here