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  • WTI prices have eased back a little on Thursday but continue to trade close to 13-month highs set on Wednesday.
  • Price action has been rangebound between the $58.10s and $58.60s as the bullish narrative remains broadly in place.

Front-month futures for the American benchmark of sweet light crude oil, West Texas Intermediary (or WTI), have eased back a little on Thursday, though continue to trade not far from 13-month highs set on Wednesday of just shy of the $59.00 mark. WTI has been rangebound between the $58.10s and $58.60s on Thursday and currently trades just to the south of the $58.50 mark, down a modest 20 cents or 0.4% on the day.

Oil fundamentals update

Crude oil markets continue to trade within striking distance of 13-month highs set earlier in the week, a reflection of the fact that the same bullish narrative that has underpinned recent upside remains very much intact; the US Congress is expected to deliver big on the next round of fiscal stimulus, which, combined with rapid vaccine rollouts and falling infection rates, is expected to power a rapid US and global economic recovery later in the year. All the while, OPEC+ continues to show broad support for its current output cut agreement despite recent upside in prices which, combined with 1M barrels per day in voluntary additional Saudi Arabia output cuts, is causing global oil markets to tighten and inventories to be drawn down.

Market commentators have been pointing to a few (slightly) negative crude oil stories, though none appear to have impacted price action much. On the demand side, comments from the head of the UK’s genetic surveillance programme seem to be triggering some anxiety; Sharon Peacock, director of the COVID-19 Genomics UK consortium said that the Covid-19 variant first found in Kent, UK is a concern because it is mutating and could end up undermine the protection provided by vaccines. The Kent strain is likely “to sweep the world, in all probability”, she said.

Meanwhile, a couple of negative supply-side fundamentals are worth noting. Firstly, petroleum facility guards at Libya’s Hariga port ended a strike that had been weighing on the country’s daily crude oil production. Meanwhile, according to data released from consultancy Rystad Energy, Argentinian oil output from the Vaca Muerta region in Patagonia (which holds the fourth-largest shale oil reserves in the world) hit a record high in December of 124K barrels per day in response to rising prices that encouraged producers to switch from gas to oil. “The oil production decline that the Covid-19 pandemic brought to Argentina’s Vaca Muerta formation now seems like a distant memory,” says analysts at Rystad Energy, who added that output could hit 145K–150K barrels per day later this year if activity holds up.