Crude oil prices are on a high as the market reacts to the preliminary data on supply curbs compliance by OPEC+. However, the ongoing demand woes have led the commodity to continue trading sideways. As at 08.02 GMT, WTI futures were up by 0.81% to trade at $52.59. Similarly, Brent futures rose by 0.91% to $55.50.
Demand and supply forces on crude oil prices
Since early January 2021, crude oil has been trading sideways. While this was expected to be the year of recovery, countries are still struggling to control the coronavirus pandemic and its economic impacts. Subsequently, the demand woes have created resistance for crude oil prices.
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The data released on Friday by Baker Hughes indicate an increase in US oil rig count. The number of active drilling rigs rose from the previous week’s 289 to 295. Since mid-November 2020, there has been a consistent rise in the rig count. The number of active entities has increased by 64 during this period.
Furthermore, a comparison of the active rigs in the current month, and the figures released a year earlier shows a steady recovery. As at 24th January 2020, there were 676 active rigs in the US. In came the coronavirus pandemic that shook economies and lessened the demand for crude oil. As at mid-August, there were 172 active oil rigs.
After falling to around $33.65 at the beginning of November 2020, crude oil prices have risen to the current level of $52.17. The surge has acted as an incentive for more US energy firms to open drilling rigs.
The resultant increase in the rig count points to a probable rise in crude oil supply. The new coronavirus variants and slow rollout of the vaccinations have impacted the demand for crude oil. The status quo substantiates the IEA’s lower estimates for the current year’s global demand for the commodity. According to the agency, the demand will increase by 5.5 million bpd to reach 96.6 million barrels. The figure represents a decline of 0.3 million barrels from December 2020’s forecast.
OPEC+ supply cuts compliance
Despite the ongoing demand woes, crude oil prices are finding support in the compliance of the supply cuts by OPEC+ members. The oil producers implemented their agreed supply curbs by 99% in January. The implementation among OPEC members was 103% while that of the non-OPEC partners was at 93%. The latter group consists of countries like Kazakhstan and Russia.
Investors looking to trade oil are keen on the review by the Joint Technical Committee, which is set to meet on Tuesday this week. On the following day, the Joint Ministerial Monitoring Committee will meet to discuss the coalition’s strategy.