Oil prices have strengthened in trading in the past couple of weeks, but is this sustainable? Elsewhere, cold weather in the US keeps natural gas on a bullish footing. 

Oil trading 

Oil prices have been enjoying a bit of a rally recently, trading above $60 and $63 for WTI and Brent respectively, although at the time of writing WTI futures had fallen back to $59.8. 

Still, the price movements have injected an undercurrent of optimism into the oil world. According to Russian sources, the market has re-balanced itself. 

“We have seen low volatility over the past few months, which means that the market is balanced, and today’s prices undoubtedly reflect this market situation,” Russian Deputy Prime Minister and former Energy Minister Alexander Novak said in a Rossiya 24 interview on Sunday. 

Novak’s view is prices will average between $45 and $60 for WTI across 2021.  

Other factors are at play whipping up the bullish sentiment in oil circles. Firstly, Biden’s mega $1.9 trillion stimulus package will help drive up oil demand in the world’s largest economy, shored up by the news that Covid-19 cases and hospitalisations are dropping in the US, and vaccine rollout is picking up speed. 

According to the EIA, 6.6m barrels left storage facilities in the US during the last reporting period, which means storage levels are about 2% higher than this time last year. So, still above the average, but the gap appears to be slowly shortening. 

OPEC production cuts continue to do their role in propping up prices, but the cartel has warned that supply is still outstripping demand, seemingly contradicting Alexander Novak’s comments. It appears the fate of oil markets will remain tied in with the pandemic for the foreseeable future. 

Natural gas trading 

Natural gas prices have been above $3.00 as cold weather systems remain across key Northern US demand areas. But the tendrils of winter cold stretch further than just the Northeast. Old Man Winter has blown his breath over Southern states with Texas now colder than Alaska.  

With such cold spikes comes an increase in residential and commercial heating gas consumption. Commentators forecast “enormous demand” while frigid temperatures remain in place.  

US natural gas storge inventories fell by 171 Bcf in the latest statistics published by the EIA, suggesting demand is already high. Will it continue? Again, it’s all down to the weather, and price action is likely to reflect that.