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February 23, 2021

Oil prices surge as vaccine and lower US output lift energy outlook

Crude oil prices have increased by more than $1 supported by optimism over the rollout of the Covid-19 vaccine and slow restart of US crude production following disruption caused by snow in Texas last week.

By Umesh Ellichipuram

Crude oil prices have increased by more than $1 supported by optimism over the rollout of the Covid-19 vaccine and slow restart of US crude production following disruption caused by snow in Texas last week.

Brent crude jumped $1.10, or 1.7%, to reach $66.34 a barrel after earlier hitting a high of $66.79, while US crude increased $0.92, or 1.5%, to reach $62.62 a barrel, Reuters reported.

The news agency cited sources as saying that southern US shale oil producers are expected to restart production in approximately two weeks as power supply interruptions and frozen pipes slow their recovery.

Cold weather in the US has triggered the closure of more than two million barrels per day (bpd) of crude output, sources noted.

Axi chief global markets strategist Stephen Innes was reported by the news agency as saying:  “The positive momentum continues in the oil complex, with investors unabashedly predisposed to a bullish view.

Goldman Sachs Commodities Research expects Brent crude oil price to increase by $10 for the second and third quarters of this year, citing higher marginal costs required to restart upstream production and reduced expected inventories.

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The bank expects Brent prices to increase from the $60 predicted previously to $70 per barrel in the second quarter, and $75 in the third quarter of this year.

OANDA senior market analyst Edward Moya was quoted by Reuters as saying: “It is hard not to be bullish with oil prices now that the deep freeze disruption practically guarantees the summer pickup in crude demand will erase whatever supply glut is left.

“The global oil demand is looking a lot better now that the Pfizer vaccine shows positive results after one dose, the UK sees the end of the pandemic ‘in sight’, and as hospitalisations and deaths continue to decline after peaking in early January.”

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