Oil rises due to demand recovery

Oil rose to almost $84 a barrel on Tuesday, supported by tight supply and expectations that rising coronavirus cases and the spread of the Omicron variant will not impact a recovery in global demand.

During these first days of the year, the price of US WTI crude has risen 8% and the European Brent from the North Sea 7.64 percent.

The Mexican mix, for its part, has gained 6.27% so far in January.

However, from April 1, 2020 until the close of this Tuesday, January 11, the price of barrels has rebounded 300% in the case of WTI, which went from 20.31 to 81.22 dollars, and from 238.40 in the of Brent from the North Sea, from 24.74 to 83.72 dollars.

Federal Reserve Chairman Jerome Powell said Tuesday that he expects the economic impact of Omicron to be short-lived, adding that the coming quarters could be very positive for the economy after Omicron declines.

Against this background, yesterday Brent crude oil gained 2.85 dollars or 3.52%, to 83.72 dollars per barrel, its highest level since the beginning of November, after having lost 1% in the previous session. WTI closed up $2.99, or 3.82%, at $81.22 a barrel.

The Mexican export mix had this Tuesday a gain of 2.44 dollars or 3.33% to trade at 75.76 dollars a barrel.

Major economies have avoided a return to harsh lockdowns, even as Covid-19 infections have soared.

US will increase production

US crude output is expected to rise 610,000 barrels a day to 12.41 million barrels a day in 2023, the government said in its first forecast for next year, down from the previous month’s forecast of a 670,000 barrel rise. .

Investors expect a surge in demand as OPEC and its allies, known collectively as OPEC+, slowly ease record production cuts made in 2020.

An analysis by Banco Base highlighted that the comments by the president of the United States Federal Reserve, Jerome Powell, encouraged the price of oil, since he anticipated that “it will take time to alter monetary policy and with the first increase in rates benchmark interest forecast for March this year, the US dollar weakened, which also supported demand for oil.”

demand will rise

There are other factors that have pushed up oil prices, such as the expectation that demand will continue to increase as the impact of the coronavirus on consumption decreases and in the face of the crisis in the energy sector in Europe and cold weather conditions in the northern hemisphere, which increases the demand for diesel.

The foregoing coupled with the reduction in the supply of crude oil from some member countries of the OPEC + group, including Kazakhstan and Libya, the report added.

“Prices continue to face headwinds, including the spread of Ómicron, as some countries are considering tighter restrictions to curb the spread of the virus,” according to Banco Base.

He added that “US oil production is expected to hit a record until next year.”

According to the United States Energy Information Administration (EIA), “oil production will reach an average of 12.41 million barrels per day in 2023. The annual maximum was 12.3 million barrels per day in the 2019”.

End session with profit

Oil companies follow the path of crude oil

The shares of the oil companies on the stock market rose this Tuesday, favored by the increase in the price of oil that exceeded the expectations of investors.

The biggest gain of the day was for the US Exxon Mobil with 4.21% rise, to be sold at 71.35 dollars per share on the New York Stock Exchange. Its counterpart Chevron had an increase of 2.29% to trade at 127.97 dollars.

The Brazilian Petrobras registered a rise of 2.96% at 28.84 reais per share, followed by the French Total Energies with an increase of 1.84% in Paris, while the English BP closed the session with a rise of 1.80% and the Dutch Royal Dutch Shell it gained 1.76 percent.

The furthest behind were Repsol, on the Madrid Stock Exchange, with a slight increase of 1.04%, followed by the Italian Eni Spa with 0.99% and Saudi Aramco with a rise of 0.98% in Saudi Arabia.

The profits of energy companies were favored as crude oil prices rebounded, driven by the weakness of the dollar and forecasts of the US Energy Information Agency, and touched levels above 81 dollars.

Amin Vera, Deputy Director of Economic Analysis at Black Wallstreet Capital, explained that the big oil companies will always benefit from rising oil prices, adding that crude oil is also being seen as an option to back up the Fed’s decisions in monetary policy issue.

“In an environment in which the interest rate is beginning to be a concern for investors, the price of oil should continue to rise and although that drives the oil companies, the outlook may lag behind the results a bit,” he said.

“Oil is used as a hedge in case the market is affected by the issue of rate hikes by the US Federal Reserve. If oil remains stable or rises, the companies most indexed to the price of crude oil will be the least affected when the market weakens”, concluded the expert. (With information from Ariel Méndez)

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