By Adedapo Adesanya ‘
Oil prices witnessed a 2 per cent rise on Thursday on expectations of tighter supplies through 2021 as economies recover from the coronavirus crisis.
The Brent crude extended previous gains by $1.63 or 2.1 per cent to close at $73.57 while the West Texas Intermediate (WTI) crude rose by $1.67 or 2.4 per cent to trade at $71.67 per barrel.
In what started as a very hectic week with prices falling more than $5 on Monday, the market has recouped all of those losses as investors expect overall crude demand to stay strong.
Following the recent headwind, forecasts also showed that demand was set to outstrip supply in the second half of the year.
This seemed to calm the market after the Organisation of the Petroleum Exporting Countries and other producers including Russia known as OPEC+ agreed this week on a deal to boost oil supply by 400,000 barrels per day from August to December to cool prices and meet growing demand.
With demand holding up, the market is starting to see that the additional crude from the cartel will not be enough to keep the market balanced. This is as inventories are projected to continue to fall, both in the United States and across some developing countries.
Crude inventories in the US, the world’s top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, US Energy Information Administration data showed, unable to register the ninth straight week of drops.
Analysts from Morgan Stanley forecast that global benchmark Brent will trade in the mid to high-$70s per barrel for the remainder of 2021, further adding support to the market.
Barclays analysts also expected a faster-than-expected draw in global oil inventories to pre-pandemic levels, prompting the bank to raise its 2021 oil price forecast by $3 to $5 to average $69 a barrel.
This will be a result of tightening the market as the OPEC+ alliance may have settled any issue that might bring division among its members.
Amid these, the market continues to face pressure as surging COVID-19 cases of the Delta variant in the United States, Britain, Japan and other countries may threaten mobility and impact prices and demand.
Dipo Olowookere