Oil futures rose Thursday to post a third straight session gain, buoyed by data showing a larger-than-expected weekly drop in U.S. crude inventories and a recent pledge by Saudi Arabia to further cuts its production levels.
“The current price levels are built mostly as a result of a jaw-dropping promise of a single oil producer, Saudi Arabia,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy. “This fact on its own shows how fragile price levels are to a potential change of mind of a single country.”
“For more stability to come to the market, the support to prices must not be artificial through supply cuts, but rather demand based,” said Tonhaugen. “That is likely to start happening from the second quarter of 2021, with the recovery cementing itself in the year’s second half.”
West Texas Intermediate crude for February delivery
rose 20 cents, or 0.4%, to settle at $50.83 a barrel on the New York Mercantile Exchange. March Brent crude
the global benchmark, added 8 cents, or nearly 0.2%, at $54.38 a barrel on ICE Futures Europe.
Crude oil markets on Wednesday shrugged off events in Washington when a violent mob disrupted the Congressional debate on the confirmation of Joe Biden as president from Jan. 20. Biden was confirmed in the early hours of Thursday morning after Democrats won control of Congress in two run elections for the Senate on Wednesday.
Oil had rallied Wednesday after the Energy Information Administration reported that U.S. crude inventories fell by 8 million barrels for the week ended Jan. 1. That compared with the decline of 1.2 million barrels forecast by IHS Markit analysts.
Earlier this week, Saudi Arabia surprised traders by announcing a unilateral production cut of 1 million barrels a day. That move is still providing a tailwind “because the oil market could tighten as a result in the first quarter, despite weaker demand due to tougher mobility restrictions in many consumer countries,” said Carsten Fritsch, analyst at Commerzbank, in a note.
Michael Tran, commodity strategist at RBC Capital Markets said the Saudi move “safeguards against a global absorption rate that could otherwise become inundated with barrels struggling to find a home, at least until demand improves further.
“If demand improves in the spring as many anticipate, the deeper cuts will prove expeditious from an oil storage surplus standpoint,” he said in a Thursday note.
Also on Nymex Thursday, natural-gas futures settled slightly lower, after briefly trading near session highs after the EIA reported that domestic supplies of natural gas declined by 130 billion cubic feet for the week ended Jan. 1.
On average, the data were expected to show a drop of 139 billion cubic feet for the week, according to analysts polled by S&P Global Platts.
February natural gas
finished the session at $2.729 per million British thermal units, down 0.5%, following an intraday high of $2.755.
added 0.5% to $1.4827 a gallon and February heating oil
tacked on 0.6% to $1.5381 a gallon.