TOKYO: Oil prices rose on Monday as the slow return of US crude output cut by frigid conditions raised concerns about supply, just as demand recovers from the depths of the coronavirus pandemic.
Brent crude was up 76 cents, or 1.2%, at $61.67 a barrel by 0104 GMT, after gaining nearly 1% last week. US oil rose 74 cents, or 1.3%, to $59.98 a barrel, having fallen 0.4% last week.
Investment bank Goldman Sachs raised its forecast for Brent by $10, helping to boost the market, with expectations for Brent to reach $70 by the second quarter and $75 in the third quarter.
“We now forecast that oil prices will rally sooner and higher, driven by lower expected inventories and higher marginal costs – at least in the short run – to restart upstream activity,” Goldman analysts wrote.
Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.
Oilfield crews will probably take several days to de-ice valves, restart systems and begin oil and gas output. US Gulf Coast refiners are assessing damage and may take up to three weeks to restore most of their operations, analysts said, though hampered by low water pressure, gas and power losses.
“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.
“Longer term, the fall in capital expenditure at US shale oil companies this year will keep drilling activity subdued, leading to output remaining below pre-pandemic levels.”
For the first time since November, US drilling companies cut the number of oil rigs operating, due to the cold and snow enveloping Texas, New Mexico and other energy producing centres.
