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oil pumpjacks
Mazen Mahdi / AFP through Getty Images
Oil prices continued on Thursday, two days after Saudi Arabia surprised the market by volunteering to cut 1 million barrels of daily output in February and March.
Brent crude, the international benchmark, was around $ 54.52, up 0.4% for the day, and West Texas Intermediate, the U.S. standard, is strongly above $ 50, where it was before the outbreak spread out application.
Oil giants have accumulated the benefits.
BP
(ticker: BP) up 16% this year, adding 1.8% on Thursday.
Exxon Mobil
(XOM) up 9% in the first few days of the year, and
Chevron
(CVX) up 6%.
The S&P 500 is up 1% this year and hit another high Thursday.
Saudi Arabia has been trying to stabilize the price of oil, which fell more than 20% last year as the pandemic slowed economic activity and forced many businesses to close for a stretch.
Analysts have seen investment levels to determine if demand is returning, a sign that businesses are starting to recover to normal. Last week, U.S. crude stocks fell 8 million barrels, far more than the expected 2.1 million-barrel decline.
That marked four consecutive weeks of investment decline, according to data from the Energy Information Administration, but in early December recorded a 15 million-barrel increase.
Rising oil prices are also good for producers. Shares of shale companies have been growing steadily.
Devon Power
(DVN) up 18% so far this year, though
Occidental Petroleum
(OXY) up 19%.
Analysts have taken their view on the sector. End of last month,
Sachs Goldman
representatives like Exxon said they had been taken over and recommended them as Buyers.
Truist analysts this week raised their price target for Chevron to $ 97 from $ 90, with a Buy rating. They raised their price target on Exxon to $ 45 from $ 39 last month, reiterating the Hold recommendation.
A new round of lock-ins and the highest number of new coronavirus cases threaten to further reduce demand, sparking debate among members of the Saudi Arabia-led Organization of Petroleum Exports, others such as Russia.
Earlier this week, the group agreed to stick to stable production, but then Saudi Arabia announced its production cut while allowing a gradual increase with Russia and Kazakhstan.
Saudi oil minister Abdulaziz bin Salman called the move of the kingdom a sign of “goodwill.”
But the move may not be enough to keep oil above $ 50, an RBC Capital Markets analyst says. It indicates something called the spread of the crack, or the difference between the price of crude and the price of the products produced after its processing, such as distillates and gasoline.
When the average rate of gasoline spillage and distillate is $ 14 per barrel or less, WTI crude is only above $ 50 about 20% of the time, he said. Currently, that crack is $ 12.50.
“Look at this area as a proxy for growing demand as well as the pace at which raw prices will be fixed in the coming months,” said Tran.
Write to Liz Moyer at [email protected]