Oil is expanding steadily in 2021, helped by new signals that the world’s largest producers will not start branches and flood the market.
US futures recently rose more than $ 50 a barrel for the first time since February last year, the latest milestone in a rebound from rising travel and economic activity as a result of reduced coronavirus restrictions. Production cuts from major Saudi suppliers to US companies are overfed, giving traders confidence that demand will exceed supply.
Prices have peaked since Saudi Arabia said last week it would unilaterally cut production in February as part of an agreement by the Organization of the Petroleum Exporting Countries and allies like Russia. The reduction in supply has instilled the belief that the cartel will remain flexible with production, even if the pandemic worsens and harms demand.
US shale producers also indicate that they are in no hurry to increase supply and instead intend to pay off debts and return cash to shareholders. Taken together, the commitments should help restore the energy industry and highlight a recognition among producers that the economic tax caused by the pandemic is far from over, say investors and industry executives. This means that there is no need for suppliers to spend on additional production.
“I don’t think the world really needs oil right now, so there’s little reason to grow,” said Richard Dealy, president and chief operating officer of Texas oil company Pioneer Natural Resources Co. Despite the recent rise in oil prices, Pioneer plans to limit oil production growth to zero by 5% in 2021.