Oil prices gained on February 1, 2021, after a weak start, adding to the gains recorded in the past three months. The price gain happened despite patchy coronavirus vaccine rollouts, new infections, and the discovery of new variants that are casting doubts over the outlook for demand.
Brent crude futures gained 36 cents, which translates to 0.7% trading at $55.40 a barrel by 0612 GMT. On the other hand, the U.S. West Texas Intermediate (WTI) gained 24 cents, or 0.5%, to trade at $52.44. Both of these benchmarks gained almost 8% in January.
The prices of oil have been boosted by different vaccination programs that are getting underway in the hard-hit countries and output cuts by the major oil producers like Saudi Arabia. But, there is euphoria over a possible end to the pandemic which has been undermined by the slow speed of vaccinations and the emergence of new variants of the coronavirus.
That said, with more vaccines now proving successful in trials and infections falling in some regions, demand for fuel and oil might pick up as a growing segment of the world’s population now gets inoculated against the pandemic. Goldman Sachs said the rally had paused:
“Our base-case remains for a demand-led rebalancing of the oil market, with the logistical challenges of vaccination likely transient and evidence of still elevated vaccine efficacy.”
Oil Markets Stable
For now, the prices of oil are expected to remain around the current levels for most of 2021 before a strong recovery gains some ground at the end of the year, according to a Reuters poll.
Notably, speculators also reduced their net long positions in U.S. crude futures and options for the week to January 26, the United States Commodity Futures Trading Commission (CFTC) said.
The U.S. oil and gas drillers are now gearing up for a pick-up in demand and as higher prices make new wells profitable once more, adding more rigs for a sixth consecutive month in January.
United States output is rising and was recorded to be above 11 million barrels per day in November for the first time since April 2021, according to the Energy Information Administration (EIA).