U.S. crude oil prices neared $57 per barrel Tuesday as major global producers signaled they would curb supply. It was the first time since last February that prices surpassed $50.
Shale producers in the U.S. have said they would pay down debt and return money to shareholders rather than increasing supply, while Saudi Arabia has announced it plans to cut output in February as part of an agreement by the Organization of the Petroleum Exporting Countries and Russia.
“Saudi Arabia, in particular, is ensuring through its additional voluntary production cuts that the market is undersupplied if anything,” Commerzbank analyst Eugen Weinberg said.
Last April, U.S. crude futures fell below $0 for the first time ever after a feud between Saudi Arabia and Russia led to supply spikes just as demand was crashing.
Brent Crude rose to $56.75 per barrel last night. West Texas Intermediate rose to $53.11 per barrel. The Wall Street Journal, citing Commodity Futures Trading Commission data, said net bets on increases in U.S. crude reached their highest levels since the middle of August.
“There’s such huge pent-up demand and people want to travel,” Gary Ross, the chief executive officer of Black Gold Investors, said in an interview with The Wall Street Journal. “Demand will be back to 2019 levels earlier than people think, probably by the third quarter.”
Ross said he thought oil prices would reach $60 per barrel in the first half of 2021.
Analysts expect crude inventories to decrease by 2.7 million barrels this week. Inventories have fallen in each of the last four weeks.
Richard Dealy, president and chief operating officer Pioneer Natural Resources, said his company did not plan to increase supply, despite rising prices.
“I don’t think the world really needs the oil at this point in time, so there’s not a big reason to grow,” Dealy said.