Oil continued rising for a ninth straight session and witnessed its longest gain in two years. Remarkably, producer supply cuts and optimism that coronavirus vaccine rollouts will lift a demand drove the oil rally.
On Tuesday, the American Petroleum Institute announced that crude inventories declined by 3.5 million barrels, against anticipation for a 985,000-barrel build.
Furthermore, Brent crude oil declined by 0.7%, which equals 42 cents, and settled at $65.11. Significantly, in the previous session, it hit a 13-month high of $61.61. Moreover, U.S. crude boosted by 0.6% or 32 cents and touched $58.68. Similar to Brent crude, in the previous session, it rose to a more than one year high of $58.76.
Brent crude oil has increased for nine straight days. This was its most prolonged sustained period of increases since December 2018 to January 2019. According to some analysts, prices have moved sharply ahead of the underlying fundamentals.
According to Bjornar Tonhaugen of Rystad Energy, the current price levels are healthier than the actual market and completely reliant on supply cuts as demand still needs to improve.
Analysts say oil supply will surpass demand in 2021
Crude oil has increased since November as governments kicked off vaccination drives for COVID-19. It placed large stimulus packages to raise economic activity, and the world’s top producers kept a lid on supply.
Furthermore, stocks were flat in early trading in Asia. Investors kept tapping the brakes on runs in asset prices after taking in tepid U.S. inflation data and remarks from the Federal Reserve chief affirming the outlook for a slow return.
Top exporter Saudi Arabia is unilaterally lessening supply in February and March. It’s extending cuts agreed by other members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+.
More people get vaccine shots and start going away on trips and working in offices. Hence, according to some analysts, supply will surpass demand in 2021.