Oil extends gains as U.S. output struggles to fully restart

Oil pours out of a spout from Edwin Drake’s original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. (Reuters)

SULAIMANI (ESTA) — Oil prices extended gains on Tuesday, underpinned by optimism over coronavirus vaccine rollouts and lower output as U.S. supplies were slow to return after a deep freeze in Texas shut in crude production last week.

Brent crude was up $1.25 at $66.49 a barrel by 0550 GMT, after earlier hitting a high of $66.79. U.S. West Texas Intermediate (WTI) rose $2.25 cents to $61.49 a barrel, having reached a session high of $63.

Both benchmarks have risen more than 2% on Tuesday after climbing nearly 4% in the previous session.

Reuters cited courses as saying that shale oil production in the southern United States could take at least two weeks to resume the more than 2 million barrels per day (bpd) of crude output that shut down because of cold weather, as frozen pipes and power supply interruptions slow their recovery.

“The positive momentum continues in the oil complex, with investors unabashedly predisposed to a bullish view,” said Stephen Innes, chief global markets strategist at Axi in a note, according to Reuters.

Goldman Sachs Commodities Research raised its Brent crude oil price forecasts by $10 for the second and third quarters of 2021, citing lower expected inventories, Reuters reported.

The Wall Street bank expects Brent prices to reach $70 per barrel in the second quarter from the $60 it predicted previously and $75 in the third quarter from $65 earlier.

Morgan Stanley, however, expects Brent crude prices to climb to $70 per barrel in the third quarter on “signs of a much improved market” including prospects of a pick-up in demand.

“It is hard not to be bullish with oil prices now that the deep freeze disruption practically guarantees the summer pickup in crude demand will erase whatever supply glut is left,” said Edward Moya, senior market analyst at OANDA in New York, according to Reuters.

“The global oil demand is looking a lot better now that the Pfizer vaccine shows positive results after one dose, the U.K. sees the end of the pandemic ‘in sight’, and as hospitalizations and deaths continue to decline after peaking in early January.”

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