Oil prices rise as crude output begins gradual return

22 Feb 2021

Oil prices increased on Monday as U.S. crude output made a sluggish return, indicating the supply situation was tight.

Reuters reports Brent crude rose 55 cents, or 0.9%, to $63.46 a barrel following close to a 1% gain last week. In addition, U.S. oil rose 47 cents, or 0.8%, to $59.71 a barrel, after a drop of 0.4% last week.

Prices were also bolstered as Goldman Sachs increased Brent’s price forecast by $10, with forecasts to reach $70 by Q2 and $75 in Q3.

According to Goldman analysts: “We now forecast that oil prices will rally sooner and higher, driven by lower expected inventories and higher marginal costs - at least in the short run – to restart upstream activity.

“Better than expected demand and still depressed supply once again creating a larger deficit than even we expected,” they added.

Up to 4 million barrels per day of crude production was shut down due to the cold weather in Texas, as well as 21 billion cubic feet of natural gas output.

It may take a number of days to de-ice valves, restart systems and start oil and gas output, the Reuters report goes on to add. Analysts have stated that U.S.

Gulf Coast refiners are evaluating the damage and it could take up to three weeks for operations to be restored.

ANZ Research said in a note: “With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low.

“Longer term, the fall in capital expenditure at U.S. shale oil companies this year will keep drilling activity subdued, leading to output remaining below pre-pandemic levels.”