Oil Prices Rebound Slightly
After trending downward for a week, West Texas Intermediate and Brent crude oil prices finished higher Tuesday.
The February WTI contract price gained 15 cents to settle at $58.23 per barrel. The benchmark peaked at $58.72 and bottomed out at $57.72.
March Brent added 29 cents, ending the day at $64.49 per barrel.
Tuesday’s oil market action ended a five-trading-day string of declines. Vance Scott, a Houston-based managing director in the energy practice of global, multi-industry consulting firm AlixPartners LLP, told Rigzone that prices had declined as recent charged rhetoric between the United States and Iran had diminished.
“Following the lowered tensions, traders seemed to evaluate the overall available capacity sitting readily on the sidelines in Russia and the OPEC nations,” commented Scott.
Scott explained that traders appeared to recognize the capacity could likely offset supply disruptions other than the most severe scenarios – such as those affecting Iraq, Saudi Arabia and other substantial Middle East sources.
“This available supply, coupled with a downward economic bias in China – even with the beginnings of a resolution of China’s trade war with the U.S. – helped bring more downward pressure in the markets,” continued Scott. “Furthermore, Suriname’s recent announcement of major discoveries by the Apache and Total joint ventures show a growing deep-water trend extending from Guyana into Suriname.”
Given its small population and budding economy, Suriname could have the potential to become a major oil-exporting country if it can overcome geopolitical issues that could constrain Western technology and capital investment, Scott noted.
“Overall globally, traders evaluated the worldwide situation and many speculators – recognizing that neither Iran nor the U.S. seems to want to escalate tensions in the Middle East – unwound positions geared to the Middle East and began to look for opportunities elsewhere,” he said.
Barani Krishnan, senior commodities analyst at Investing.com, reflected on the volatility of the oil market since the start of the year.
“What a difference a week makes,” Krishnan said. “On the first Friday of 2020, U.S. WTI crude hit eight-month highs above $64 per barrel. But by the second Friday, the U.S. crude benchmark had posted its biggest weekly loss in more than six months.”
Meanwhile, Krishnan pointed out that oil bulls’ distress has grown as U.S. crude and fuel products supplies have surged to levels not seen for a year.
“To those who braved last week’s $4 per barrel crash, the perplexing question is: What bullets does the market have left, if any, to shoot back higher,” Krishnan stated. “The answer, of course, is OPEC production cuts. And – briefly, perhaps – the U.S.-China phase one deal that is scheduled to be signed at the White House on Wednesday.”
Krishnan added that much hinges on whether Russia remains a partner in the OPEC+ alliance.
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