Strong U.S. factory data and improving unemployment numbers helped boost oil prices for a fourth consecutive session, although the consequence of this good news–a stronger U.S. dollar–capped gains.
Brent settled up 38 cents at $58.84 per barrel, and West Texas Intermediate settled up 54 cents at $54 per barrel.
The U.S. Commerce Department reported that factory orders increased 1.1 percent, beating analytical expectations, while Labor Department data showed a drop in new unemployment benefit applications; also on Thursday, Congress took the first steps toward advancing President Joe Biden‘s proposed $1.9 trillion coronavirus aid plan.
John Kilduff, founding partner at Again Capital, said these developments combined with the Organization of the Petroleum Exporting Countries (OPEC) extending its oil supply pact at existing levels mean that “I would expect for this market to tighten up further.”
However, not everybody viewed oil’s gains this week in a positive light: Dharmendra Pradhan, oil minister for India, warned on Thursday that gasoline prices have risen to record levels in his country, and that “Efforts at artificially distorting prices will have a dampening effect on the fragile global economic recovery that is underway.”
He added that “If the world has to grow as a whole, there has to be a mutually supportive relationship between producers and consumers…it is in the interests of producers that oil-dependent economies keep growing steadily.”
By contrast, John Kemp, commodities analyst at Reuters, worried that rising oil prices heralded future shortfalls: on Thursday he wrote that the current price levels “are signalling the need for more production in the second half of the year to halt the fall in global inventories and satisfy recovering consumption as epidemic-related travel restrictions ease.”
Still, while oil rises and the Covid vaccines propel the world slowly back to normality, energy majors are stuck dealing with the wreckage of 2020: Royal Dutch Shell on Thursday became yet another top producer to post disappointing fourth quarter results, and this caused Christyan Malek, analyst at JPMorgan Chase & Co., to remark that “Cash flows generated in the fourth quarter are a low point,” but should improve this year.
