Crude Oil Tops $66 as China’s Recovery Aids Outlook for Bulls


Oil opened the week in robust form after a raft of economic data from China added to signs of recovery from the coronavirus pandemic just as the OPEC+ alliance presses on with output curbs to drain global inventories.

West Texas Intermediate in New York gained 0.9%, while Brent also climbed. Figures from China for the first two months of the year showed a surge in industrial output, underscoring the strength of its V-shaped recovery and reinforcing expectations for increased energy demand. Citigroup Inc. raised its full-year Brent forecast and warned of spikes to $80 a barrel.

Crude has rallied strongly in the opening months of 2021, supported by the vaccine-aided recovery from the pandemic and the decision by the Organization of Petroleum Exporting Countries and its allies to keep a tight rein on supplies. That combination — plus attacks on Saudi Arabian oil infrastructure by Yemen’s Houthi rebels — helped London’s Brent crude to top $71 a barrel last week.

Oil's back on an upward trajectory with improving prospects for demand recovery

“Once again, a much-improved demand picture along with supply cuts, particularly from OPEC+, have us drifting higher,” said Michael McCarthy, chief markets strategist at CMC Markets Asia Pacific. “I expect, if anything, we are going to see higher levels.”

  • West Texas Intermediate for April delivery rose 0.9% to $66.18 a barrel on the New York Mercantile Exchange at 7:39 a.m. in London.
    • Earlier, the price advanced to $66.40 a barrel.
  • Brent for May settlement climbed 0.9% to $69.82 a barrel on the ICE Futures Europe exchange.
  • The Bloomberg Dollar Spot Index added 0.2%.

Reflecting optimism about the scope for further gains, Citigroup’s full-year Brent outlook was raised $5 a barrel to $69 amid the OPEC+ curbs. While the bank cautioned in a note that oil wasn’t on the cusp of a so-called supercycle, it said Brent could hit $75 or even $80 over the next few months.

Among the welter of figures from China, apparent oil demand rose almost 17% in January-February from a year earlier, to 13.326 million barrels a day, according to data compiled by Bloomberg. That snapshot takes into account domestic oil-processing volume, and the net import of refined petroleum.

More Chinese are taking to the skies, too, in a boost for jet fuel. Air-passenger volume rose to 23.9 million trips in February, according to the local civil aviation administration. That’s approaching three times year-earlier levels.

There have also been positive signs from the U.S., with the weekly Covid-19 death toll declining to a four-month low and new infections dropping. That’s boosting the outlook for oil consumption in the world’s largest economy.

The OPEC+ alliance is wagering its tighter-for-longer policy on supply curbs will buttress higher prices without provoking a resurgence in U.S. shale output. On Friday, Baker Hughes Co. data showed the U.S. rig count little changed.

At the same time, WTI’s prompt timespread widened to 4 cents a barrel in contango, a bearish pattern where near-term prices are cheaper than those further out. A week ago, the front-month WTI contract was backwardated.

That shift follows a further build in U.S. crude inventories last week, with several Gulf Coast refineries still trying to return to service after getting shuttered during the cold snap in February.

Brent’s prompt timespread was steady at 54 cents a barrel in backwardation.