Oil prices hover near $64 as crude inventories climb

By Sharon Cho and Alex Longley on 3/10/2021
Bakken shale drilling
Bakken shale drilling

SINGAPORE (Bloomberg) --Oil bounced between gains and losses before data on U.S. oil stockpiles due later.

Futures in New York crept higher on Wednesday, reversing an earlier decline. The American Petroleum Institute reported crude inventories rose last week, while gasoline stockpiles fell, according to people familiar.

Still, there are signs of weakness in the market. WTI’s nearest timespread briefly erased all of its backwardation -- a structure that indicates tightness -- on Tuesday. Oil production across American shale patches next year is expected to climb as producers take advantage of a price recovery, according to a government report.

Oil market volatility has also been creeping higher in recent weeks. Still, crude is up more than 30% this year, after hitting a multiyear high on Monday as the market tightens. Output cuts from Saudi Arabia and OPEC+, and an improving demand outlook with the rollout of Covid-19 vaccines have both aided the rally, while political risks are returning after an attack on Saudi Arabia in recent days.

“Global oil inventories could be back to normal already in May this year,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “OPEC+ is keeping the market much tighter this year than we had expected.”

Prices:

  • West Texas Intermediate climbed 0.6% to $64.42 barrel at 7:59 a.m. London time
  • Brent for May settlement rose 0.4% to $67.82

Meanwhile Russia’s foreign minister, Sergei Lavrov said his country sees no reason to stop co-operating on oil markets with Saudi Arabia. OPEC’s largest producer said it will take measures to ensure global energy security, after attacks on its infrastructure this week.

There are already signs that oil demand is recovering. An idled plant in the Philippines will restart in the second half as fuel sales rebound in the Asian nation. Congestion in New York is also clawing back, with this month set to mark the fastest increase in toll route traffic since November 2019.

Other oil-market news:

  • Iranian President Hassan Rouhani says his country is ready for full or partial compliance with the nuclear deal if the U.S. does the same.
  • Chevron Corp. revived aspirations to pump 1 million barrels a day in the Permian Basin after drastic budget and job cuts trimmed operating costs.
  • China is gorging Iranian oil even as other nations wait for U.S. President Joe Biden to remove sanctions on the Islamic Republic.

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