The price of oil rose on Monday as US output slowly began to return after being cut by frigid conditions in Texas, showing the continued tightness of supply as demand sees an uptick from the sharp decline caused by the COVID-19 pandemic.
Brent crude rose 0.9% to $63.46 per barrel by 07:42 AM GMT, following a gain of almost 1% last week. US oil also rose 0.8% to $59.71 per barrel after last week’s 0.4% slump.
Prices were boosted further with Goldman Sachs’s announcement that it was raising its Brent price forecast by $10, with expectations for the price to reach $70 by Q2 and $75 by Q3.
“We now forecast that oil prices will rally sooner and higher, driven by lower expected inventories and higher marginal costs – at least in the short run – to restart upstream activity,” analysts at Goldman wrote.
Texas is home to 40% of the oil output of the US. Following the deadly winter storms that have brought the state to a standstill, the US government adjusted its production forecast down by 140,000 barrels per day to 7.16 million bpd.
The lack of a swift crude rebound in the US is likely to help OPEC and its allies to manage the market, though an OPEC source speaking with Reuters did not imagine that factor “will be permanent.”
OPEC is slowly winding down the record output curbs it imposed last year as both oil prices and demand buckled under the pandemic. Members of the alliance will meet on 4 March to review demand as it stands, though the organisation does not expect to see a repeat of 2020.
“US shale is the key non-OPEC supply in the past 10 years or more,” another OPEC delegate said. “If such limitation of growth is now expected, I don’t foresee any concerns as producers elsewhere can meet any demand growth.”