Crude oil prices in the United States topped $ 50 a barrel last week for the first time since the onset of the coronavirus crisis, boosted by Saudi Arabia’s promise of a sharp cut in production that boosted morale in the besieged US shale plate.
This milestone crowns an astonishing recovery by West Texas Intermediate, the marker for US crude that fell into negative territory at the height of the pandemic just under a year ago.
Oil prices have rebounded gradually since the collapse last year, but WTI had hovered between $ 45 and $ 50 in recent months. Saudi engagement pulling an additional 1 million barrels per day from the market in February and March pushed it above the line. The deal struck by producer group Opec + sent Brent crude, the international benchmark, above $ 55 a barrel on Friday for the first time since February.
“The current price levels are mainly the result of a mind-boggling promise from just one oil producer – Saudi Arabia,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Analysts said the Saudi move was designed to support prices, as further European lockdowns could undermine market demand. Last years unprecedented collapse in the United States, crude prices came as restrictions to stop the spread of Covid-19 kept cars from moving and planes stranded, crippling demand for fuel. Meanwhile, a price war between Russia and Saudi Arabia has flooded the global supply market.
Unable to make a profit, American producers were forced to cut spending, laying off thousands of workers, closing wells and installing rigs. The number of bankruptcies has increased.
Rising prices will allow companies to loosen their purse strings again. Standard Chartered analysts said they now expect WTI to average $ 49 per barrel in 2021, hastening the return to drilling and stemming the expected drop in production this year.
But any resumption of growth will be tempered by a desire to exercise discipline to investors concerned with avoiding a return to the levels of capital consumption of the past.
“It’s good to be over $ 50,” said Scott Sheffield, managing director of Pioneer Natural Resources, an independent producer in the prolific Permian Basin. “But that doesn’t mean that multiple platforms are going to return to work.”