Oil prices were soaring and expected to rise over $70/bbl by 2Q21. Inventories were dropping and pockets of demand were beginning to spring up, and then Texas froze over and news of the US airstrikes in Syria broke late yesterday evening. In an unsettling world of ups and downs on the newswire, “how did” or “how will” oil markets react to all the recent news?
A strengthening dollar put oils momentum on a temporary pause. Despite concerns over demand, crude remains on track to have a 5% weekly gain following the best year to date. Tightening supply and pockets of demand continue to draw down inventories. Additionally, Mother Nature disrupted the narrative when she produced her own version of “The Big Chill” and roared into Texas, freezing the state and its refineries, and curbed US output by at least 100,000/bbl a day. Winter storm Uri also influenced the water and natural gas prices in the US Southeast, which saw unprecedented price hikes.
The same winter storm that shut down Texas strengthened New York. With Texas refineries frozen over, crude inventories saw draws. Supply began to tighten up and the Northeast strengthened as the Southeast pipelines were forced to declare force majeure. Gasoline futures rose 4.3% and natural gas increased by 5.7%. New York Cash Markets bolstered, and oil prices strengthened despite no real increases in demand.
Late last evening, news broke worldwide that the US had carried out strategic airstrikes in Syria, near the Iraqi border, in response to attacks on green zones in Baghdad in mid-February. This was the first military action under the new Biden administration. Even with the Syrian airstrikes, Biden’s administration remains firm that it intends to deescalate and focus on China and the challenges it poses. Stock market futures and crude held steady in the wake of the news. The largest “slide” was crude falling off 0.7% to $63.04.
Crude continues to remain on track to improve amidst the chaos of unprecedented breaking news stories. OPEC will meet soon, and Russia has indicated they wish to ease production cuts. Texas has since thawed and will soon right the output production ship suggesting we should see a slight pullback in markets. The Biden administration has made it clear they have no intention to broaden the US military involvement in the Middle East. While the future for oil is looking up, be cautious as the dollar strengthens and demand continues to struggle to climb out of the abyss created by COVID-19 a short year ago and talk to a Guttman sales team member to strengthen your commodities positions for 2021.