By Barani Krishnan
Investing.com – Global oil benchmark Brent breached $50 per barrel on Thursday the first time since the pandemic-induced market crash of March, amid optimism spurred by Covid-19 vaccines deployed in the U.K. and as investors hedged against an oilfield attack in Iraq.
Despite that Moody’s forecast a much lower range of between $40 and $45 for Brent in 2001. “Modest improvement in 2021 oil prices will not lead producers to boost capital investment, while fuel demand will rise but not to pre-downturn levels,” the rating agency said.
U.K.-based Brent was up $1.53, or 3.1%, at $50.39 per barrel by 2:45 PM ET (20:45 GMT). It earlier hit $51.05, its highest since March 5.
Within three weeks of those peaks in March, Brent tumbled below $22 and fell even lower in April to under $16 after the spread of the Covid-19 triggered business lockdowns across U.S. capitals. Major oil producer Saudi Arabia all-out production war against Russia after their disagreement on output cuts also weighed heavily on crude prices.
New York-traded West Texas Intermediate, the leading indicator for U.S. crude, settled up $1.26, or 2.8%, at $46.78 per barrel. It hit $47.73 earlier in the session, its highest since March 5 too.
WTI’s spike interestingly came a day after the U.S. government reported a monstrous build in domestic crude stockpiles crude stockpiles for last week. U.S. crude inventories rose by 15.2 million barrels for the week ended Dec. 4, the Energy Information Administration said, versus analysts’ expectations for a 1.42 million-barrel drawdown instead.
That was not the only build announced by the EIA.
Distillate stockpiles, which include diesel and heating oil, rose by 5.2 million barrels during the week ended Dec. 4, against expectations for a 1.41 million barrel increase, the agency’s data showed.
U.S. gasoline inventories rose by 4.22 million barrels last week the EIA said, compared with expectations for a 2.27 million-barrel build.
But oil’s most optimistic investors swept aside the bearish EIA report, barely allowing WTI prices to fall in Wednesday’s trade. In doing so, there seemed to be little or no consideration on their end on whether such inventory spikes would become more common during the fall-to-winter season when demand for oil is typically lower — what not with the lingering impact of the Covid-19 adding to the slack in fuel consumption now.
“The U.S. inventory data showed a 25 million total build in stocks (but) was ignored,” Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina, noted in his daily commentary on energy.
“(It) has also given additional hope to the bulls and sent the shorts even more to the sidelines,” wrote Shelton, an oil bull himself, who seemed stunned by the market’s strong upward bias.
Oil prices have been on a tear over the past month on bets that people across the world might soon be able to travel freely as millions of doses of coronavirus vaccines were being prepared for delivery over the course of the next few weeks, after their approval by U.S. and U.K. health authorities.
Also helping market sentiment was the apparent discipline by oil producer group OPEC+ in allowing a hike of just 500,000 barrels per day in total by its 13 members and 10 allies — versus initial talk of a 2 million bpd hike.
Thursday’s rally in oil was aided by Covid-19 vaccinations that began in Britain this week and were expected to start by this weekend in the United States. Canada on Wednesday also approved its first vaccine and said initial shots would be delivered starting next week.
Concern over an attack on an Iraqi oilfield also lent support to crude prices. Two wells at a small field were set ablaze by explosives though the incident did not affect production.