Crude soars as key banks and traders project further oil price gains

Elizabeth Low and Alex Longley February 20, 2021

(Bloomberg) --Brent oil resumed gains, with Goldman Sachs Group Inc. predicting prices will advance into the $70s in the coming months.

Futures in London rose back above $63 a barrel after the gradual resumption of some U.S. output following frigid weather put prices under pressure on Friday.

A robust recovery in demand from the Covid-19 pandemic had pushed prices to the highest settlement in more than a year last Wednesday, and Goldman sees the rally accelerating as consumption outpaces supply from OPEC+ and shale. Crude oil stored at sea fell to an 11-month low last week, according to Vortexa, another sign of dwindling supplies.

Saudi Arabia and Russia, meanwhile, are heading toward an OPEC+ meeting next week with differing opinions on whether to add more supply to the market in April. The kingdom wants to hold output steady, according to delegates, but Moscow is indicating that it still wants to proceed with an increase.

“The OPEC+ decision looms as a major risk event for the oil market,” said Stephen Brennock, an analyst at PVM Oil Associates. Yet prices “are still expected to stay on a bullish trend.”

Crude has gained more than 20% this year after a January pledge from Saudi Arabia to deepen production curbs turbocharged a rally triggered by Covid-19 vaccine breakthroughs. Brent’s prompt timespread has firmed in a bullish backwardation structure, signaling a tighter market and helping to unwind global stockpiles built up during the pandemic.


  • Brent for April settlement climbed 0.5% to $63.19 a barrel at 9:56 a.m. London time
  • West Texas Intermediate for March delivery, which expires Monday, gained 0.3% to $59.42
  • The more-active April contract rose 0.4% to $59.47

Goldman is predicting Brent will reach $70 a barrel in the second quarter and $75 in the following three months, $10 above its previous forecasts, according to a note. Consumption will return to pre-virus levels by late July, while output from major producers will remain “highly inelastic” to the rising prices, the bank said.

Iran and the U.S., meanwhile, have been sparring over how to revive a nuclear deal, reflecting the challenge ahead for President Joe Biden even as nuclear inspectors persuaded Iran to temporarily allow some wider monitoring. Tehran this weekend renewed demands that the U.S. administration rejoin the accord and lift crippling sanctions on the Iranian economy before talks can resume.

Other oil-market news:

  • Iraq decided to halt its oil prepayment deal with a Chinese company after prices rose, Iraq’s Oil Minister Ihsan Abdul Jabbar said in an interview with BBC Arabic.
  • Presidential climate envoy John Kerry vowed on Friday that the U.S. would take aggressive steps to reduce its carbon emissions as the nation officially rejoins the Paris climate accord.
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