Oil is expanding back to 2021, backed by new signals that the world’s largest producers will not turn on the spigots and flood the market.
U.S. crude times recently rose above $ 50 a barrel for the first time since February last year, the latest milestone in a rebound led by an uptick in travel and economic activity after mitigation of coronavirus restrictions. Product cuts by major suppliers from Saudi Arabia to U.S. companies are fueling the upturn, reassuring traders that demand will outstrip supply.
Prices have been hitting new peaks since Saudi Arabia said last week that it would cut yields unilaterally in February as part of an agreement with the Organization of Petroleum Exporting Countries and allies like Russia. The supply loops include a belief that the cartel will be flexible with yield even as the pandemic worsens and hurts demand.
U.S. coal shale producers also indicate they are in no hurry to increase supply and instead plan to pay off debts and return money to shareholders. Taken together, the pledges should help the energy industry recover and clarify recognition among producers that the economic tax caused by the pandemic is far from being, investors and industry officials say. That means suppliers don’t have to spend on extra production.
“I don’t think the world is in dire need of oil at the moment, so there’s no big reason for growth,” said Richard Dealy, president and chief operating officer of a Texas oil company. Pioneer Natural Resources Co. Despite the recent rise in oil prices, Pioneer still plans to curb oil production growth at zero to 5% in 2021.