Oil Rally Pauses After Longest Winning Streak in Two Years

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Feb 10 2021, 5:13 AMFeb 10 2021, 9:58 AMFebruary 10 2021, 5:13 AMFebruary 10 2021, 9:58 AM

(Bloomberg) -- Oil was steady after the longest run of gains in two years as an industry report pointed to another decline in U.S. crude stockpiles.

Futures in New York have rallied almost 12% over the past seven sessions in the longest winning streak since February 2019, extending a rebound from the depths of the Covid-19 pandemic. The American Petroleum Institute reported inventories fell by 3.5 million barrels last week, according to people familiar, while the oil market is now offering the biggest yield in about a year.

There are reasons to be cautious about the rally, however. One technical indicator is signaling oil is overbought and due for a correction, and there are concerns that elevated prices will prompt producers to pump more crude.

Oil’s rally has gathered momentum this year after a pledge from Saudi Arabia to deepen output cuts and as stockpiles in regions across the world including China are drained. While there are still concerns about near-term demand as countries continue to tackle the spreading virus, prompt timespreads have firmed in backwardation, signaling investors are bullish on the outlook.

“This rally will continue until it reaches a stage where Saudi Arabia is comfortable letting market forces take charge,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “We could potentially see a continuing supply deficit with demand recovering, and that’s supporting oil prices.”

Prices
West Texas Intermediate for March delivery slipped 0.2% to $58.22 a barrel on the New York Mercantile Exchange at 12:21 p.m. Singapore time after rising 0.7% on Tuesday. Futures closed at the highest level since January 2020. Brent for April settlement gained lost 9 cents to $61 on the ICE Futures Europe exchange after adding 0.9% on Tuesday. Crude futures fell 1.8% to 371.6 yuan a barrel on the Shanghai International Energy Exchange.

Prices

West Texas Intermediate for March delivery slipped 0.2% to $58.22 a barrel on the New York Mercantile Exchange at 12:21 p.m. Singapore time after rising 0.7% on Tuesday.
- Futures closed at the highest level since January 2020.
Brent for April settlement gained lost 9 cents to $61 on the ICE Futures Europe exchange after adding 0.9% on Tuesday.
Crude futures fell 1.8% to 371.6 yuan a barrel on the Shanghai International Energy Exchange.

U.S. gasoline stockpiles expanded by 4.81 million barrels last week, the API said. If confirmed by government data on Wednesday, it would be the biggest gain since April. The industry report also showed inventories of distillates -- a category that includes diesel -- declined.

American oil explorers are set to boost drilling and production from the second half of this year, with crude prices set to stay above $50 a barrel, the Energy Information Administration said in its Short-Term Energy Outlook on Tuesday. The agency also said U.S. petroleum consumption is unlikely to reach pre-pandemic levels this year or next.

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