Crude Oil Hits $61 as Inventories Continue to Drop

By Adedapo Adesanya

The recent gains at the international oil market continued on Tuesday as the global benchmark, the Brent crude, gained 58 cents or 0.96 per cent to sell at $61.12 per barrel.

Also, the United States benchmark futures, the West Texas Intermediate (WTI) crude, made a 0.69 per cent or 40 cents gain to trade at $58.32 per barrel. The growth showed that oil prices have returned to pre-pandemic levels.

Recently, the impact of tightened supply by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), strong US economic data and falling inventories have helped the commodity maintain a strong balance in the market.

Vaccination drives for COVID-19 from governments while putting in place large stimulus packages to boost economic activity have equally renewed confidence in investors.

Support was further strengthed on Tuesday as the American Petroleum Institute (API) confirmed that crude inventories fell by 3.5 million barrels in the week to February 5 to about 474.1 million barrels.

The official Energy Information Administration (EIA) data is due later Wednesday and will ascertain the level of drops in inventories.

Other factors have also played their parts to push up prices such as efforts by oil-producing nations, particularly Saudi Arabia, to limit output. The oil giant will take off two million barrels per day in two months on top of its agreed output cut.

Since agreeing to the cut in production last April, allied producers have held back a cumulative 2.1 billion barrels of oil, leading to decreasing stockpiles, which helped prices.

Some analysts are now forecasting there will be a supply deficit in 2021 as more populations get vaccinated and start going away on trips and working in offices, potentially boosting fuel demand.

The EIA lifted its 2021 and 2022 forecasts for both crude futures oil prices in its Short-term Energy Outlook report released Tuesday.

The organisation raised its Brent crude price forecasts by 0.9 per cent to $53.20 for 2021 and by 3.3 per cent to $55.19 for 2022.

The EIA then pegged its 2021 WTI oil price forecast at $50.21 a barrel, up 1 per cent from its January outlook, and lifted its 2022 forecast by 3.5 per cent to $51.56.