Another good week for oil after prices climbed more than 2% on Friday, hitting the highest levels in more than a year on hopes the American economy will rebound and fuel more demand for oil products.
As well, US oil companies added oil and natural gas rigs for a 12th week in a row last week, the longest streak of additions since June 2017, according to services company Baker Hughes.
In Europe, Brent crude settled up $US1.29, or 2.1%, at $62.43 a barrel after hitting a session high of $US62.83, the highest since January 22, 2020. US West Texas Intermediate (WTI) crude futures settled up $US1.23, or 2.1%, at $US59.47 after rising to a session high of $US59.82, the highest since January 9, 2020.
WTI crude notched a weekly gain of about 4.7% after a 9% gain the week before while Brent rose 5.3% on the week after rising 6% the week before.
Oil prices have risen over recent weeks due partly to production cuts from the Organisation of the Petroleum Exporting Countries (OPEC) and allied producers in the group OPEC+.
“Oil prices held onto their recent gains this week, buoyed by further signs that crude stocks, particularly in the U.S., are falling,” Capital Economics analysts said in a note.
“We anticipate that inventories will fall further later this year as transport fuel demand revives in tandem with the easing of virus-related restrictions on travel.”
Despite that optimism, OPEC and the International Energy Agency (IEA) both cast doubt on the durability of demand.
OPEC cut its global oil demand increase for 2021 by 110,000 barrels per day (bpd) to 5.79 million bpd.
The IEA pointed out that oil supply was still outstripping global demand, though COVID-19 vaccines could be expected to support a demand recovery.
Demand data from the China (the world’s biggest oil importer) also paints a bleak picture.
The number of people who travelled in China ahead of Lunar New Year holidays slumped by 70% from two years ago as coronavirus restrictions curbed the world’s largest annual domestic migration, official data showed.
The 2020 New Year holiday was locked down so there was very little movement.
The oil and gas rig count, an early indicator of future output, rose five to 397 in the week to last Friday its highest since May.
US oil rig numbers rose by seven to 306, the biggest weekly increase in almost a month. Gas rigs fell two to 90.
Despite rising for six months in a row, that count is still 393 rigs, or 50%, below this time last year.
The total count, however, has surged since hitting a record low of 244 in August. Oil rigs totalled 176 last August, so they are up 130 in six and a half years.
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Metals ended the week mixed as China went on holidays which will impact demand for the coming week.
Copper has a solid week, gold edged higher, silver was higher, iron ore rose – mostly in the run up to the start of the Lunar New Year holiday on Friday.
Comex gold fell to settle around $US1,823.20, down 0.2% for the day. But the metal still added half a per cent for the week. Gold finished the week around $US1,824 an ounce in after hours trading.
Even though gold rose for the week, traders worry that if gold dips below $US1,800 an ounce this week, it might fall further as there doesn’t seem to be much support as far down as just over $US1,700 an ounce.
The test will be if gold falls to around $US1,780 an ounce. if it breaks that level then it could fall sharply – if the US dollar rises further this week and the US bond yield rises above the 1.20% reached on Friday, that could kick supports away from the metal.
The gold ETF market is now seeing outflows and resurgence to the upside might take a while, he added. It looks like gold can re-test the lows of $1,780-85 next week. “We must hold $1,780. If not, a lot of longs will be bailing,” he told Kitco.
Comex copper prices rose more than 4% last week to end Friday at $US3.7915, close to the highest level for nearly 9 years.
But this year, Chinese inventories have dropped to near decade lows on robust demand from factories, which are maintaining high operating rates due to shortened shutdown periods and tighter travel restrictions for workers.
Meanwhile, effects of the pandemic on copper supplies continues to be felt. In what was supposed to be a year of supply growth, global mined output fell 2% (400,000 tonnes) in 2020 to 20 million tonnes from 2019, according to the International US Geological Service (USGS).
USGS said that global copper output declined slightly over previous year primarily due to COVID-19 lockdowns in April and May. These disruptions significantly affected output in Peru, the second-ranked mine producer of copper, where production through July 2020 fell by nearly 250,000 tonnes (23%) from that in the same period of 2019.
USGS added that global refined copper production increased slightly to an estimated 25 million tonnes last year from 24.5 million tonnes in 2019, when output in multiple countries was affected by temporary smelter shutdowns for maintenance and upgrades.
Global mine copper production has hovered around 20 million tonnes level over the last five years and and analysts are raising concerns of sustainable supplies of primary copper for the variety of industries, especially renewables and electric vehicles.
Global iron ore prices ended at $US166.88 a tonne for 62% fe fines delivered to northern China. That was up from $US157.01 a tonne the orevious Friday.
The price of 65% Fe fines rose $US10 a tonne to end Friday at $US190.20 a tonne (up from $US180.10 a tonne).
