Oil is delivering a steady recovery in 2021, aided by fresh signals that the world’s largest producers will not turn on the spikes and flood the market.
U.S. crude futures recently rose above $ 50 a barrel for the first time since last February, the latest milestone in a rebound driven by an increase in travel and economic activity following the easing of coronavirus restrictions . The production cuts by major suppliers from Saudi Arabia to US companies are causing the advance to turbo, giving traders confidence that demand will exceed supply.
Prices have reached new highs since Saudi Arabia said last week that it would reduce production unilaterally in February as part of an agreement reached by the Organization of the Petroleum Exporting Countries and allies such as Russia. The supply instilled confidence that the cartel would remain flexible with production, even if the pandemic worsens and demand harms it.
U.S. shale producers also indicate that they are not in a hurry to increase supply and rather plan to pay off debt and return cash to shareholders. Collectively, the commitments should help the recovery of the energy industry and emphasize the recognition among producers that the economic toll caused by the pandemic is far from over, say investors and managers in the industry. This means that suppliers do not have to spend any additional production.
“I do not think the world really needs the oil at this time, so there is no great reason to grow,” said Richard Dealy, president and chief operating officer of Texas oil company Pioneer Natural Resources Co. said, despite the recent rise. in oil prices, Pioneer still plans to limit oil production by 2021 to zero to 5%.