- WTI has passed l66.00 for the first time since April 2019.
- Commodities continue to benefit from the glow of Thursday’s bullish OPEC + result.
- But the demand outlook also continues to strengthen, adding further upward pressure on prices.
The previous month’s futures contracts for the US benchmark for light sweet crude, West Texas Intermediary (o WTI), continue to rise on the last trading day of the week. WTI has now eclipsed the $ 66.00 level for the first time since April 2019 and, after printing new 2021 highs at 66.20, it was just 38 cents from the 2019 high at $ 66.58.
Technically speaking of a breakout above the 2019 high could open the door for an even longer rise towards the 2018 highs at $ 76.88. A breakout beyond this level would open the door for a pullback, even if we don’t get too far ahead.
On the day, WTI lost more than 3% or 1.80 more. That means it has rebounded more than 11.0% from this week’s low (set on Wednesday). On the year, that means WTI is trading more than 36% higher, making it one of the top performing major asset classes.
Performance of the day
Crude oil markets continue to benefit from the glare of OPEC + Thursday’s announcement that the group will keep output largely stable. Russia and Kazakhstan were granted a small production increase concession of 150,000 barrels per day, but the rest of the cartel will renew in April their production cuts that have been in place for the past few months. Additionally, the Saudis chose to continue their 1 million barrels per day in additional voluntary production cuts. The OPEC + markets were expected to decide to put back up to 1 million barrels per day in supply, so this was a very optimistic result.
Improve the demand outlook
Although OPEC + has been the main focus of crude oil markets for the past three days, it is also worth noting that the outlook for crude oil demand in the coming months continues to strengthen.
Friday’s report on the US labor market showed a much stronger-than-expected rebound in employment in the country in February as Covid-19 restrictions were eased, which bodes well for US employment prospects. (And the US economy in general) in the coming months.
Prospects for an economic recovery, while perhaps not as bright as in the US, also look good for most of the rest of the world. As the Northern Hemisphere enters summer, virus levels should naturally drop and economic constraints with them (as was the case in 2020), implying, by default, higher demand for crude oil. Fears about the international spread of Covid-19 variants likely mean that international travel restrictions remain much stricter than national restrictions (which will affect demand for jet fuel).