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Energy Information Management estimates that Brent crude prices will average $ 56 in the first quarter of 2021.
Wenbin Yu / Bruadar
Just as oil is running wildly, doubts are beginning to arise.
Brent crude futures hit a new 52-week high of $ 61.09 per barrel Tuesday, finishing in the black for the eighth straight day. Brent, the international benchmark, is up 10% over that period and 18% for the year, rebounding faster than almost anyone expected on Wall Street last year. The latest price increase was prompted by Saudi Arabia’s bizarre decision in January to unilaterally reduce production by an additional 1 million barrels – in addition to cuts imposed by OPEC.
But a U.S. government agency that monitors energy markets believes these benefits may be extraordinary. Energy Information Management released a forecast Tuesday that predicts Brent crude prices will average $ 56 in the first quarter and then $ 52 average the rest of the year.
The EIA expects Texas West Intermediate crude, U.S. benchmark, to average $ 50.31 this year, compared to current prices around $ 58.
The EIA expects prices to slip as operators begin to produce more oil, causing supply to start building up. Moreover, oil production far outperformed demand in 2020, and the high levels of oil in storage could keep prices afloat.
“The EIA expects lower oil prices later in 2021 due to an increase in oil supply that will delay the withdrawal of global oil investments,” the EIA report says. “The EIA also expects high global oil investment levels and additional production capacity to reduce upward price pressures. ”
The EIA is not alone. Rystad Energy analyst Louise Dickson wrote on Tuesday that “the continuing rise in oil prices feels like a bubble going up every day. We don’t expect a modern fix, but the bubble will have to break at some point, it’s just market physics. ”
So far, U.S. producers have held the line and kept production low, despite rising prices. Chris Wright, CEO of the coal shale drilling company
Liberty Oil Services
(LBRT) said late last week that operators did not appear to be producing back online.
“We are not going to see any new CapEx additions from the publicly traded oil producers, Wright said on the company’s employment call.
The latest price increase has led to an increase in oil stocks, which are experiencing a significant operating decline at prices above $ 50. above $ 50 at baseline. Stocks that are particularly sensitive to changes in oil prices could decline if oil prices turn. Names that analysts say are more sensitive to price changes include
MEG power
(MEG), Centenary Resource Development (CDEV),
Ola Marathon
(MRO), and
Occidental Petroleum
(OXY).
Write to Avi Salzman at [email protected]