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Page added on February 15, 2021

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Does a Correction Loom for the Oil Market?


Is crude oil due for a correction, or do demand fundamentals support continued upward momentum in prices? This question has been posed recently by various oil market observers. In this week’s installment of what to watch in the oil and gas markets, two of Rigzone’s regular market commentators offer rationales behind both price scenarios. Meanwhile, a third prognosticator points out that demand for one natural gas liquid has been quite healthy and could remain so for longer than expected. Keep reading for details.

Phil Kangas, US Partner-in-Charge, Energy Advisor, Natural Resources and Mining, Grant Thornton LLP: As oil prices have gained ground in recent weeks, so have active rig counts.  Baker Hughes (NYSE: BKR) reported that both the total count and the oil rig count are now at the highest numbers since last spring, achieving 11 consecutive weeks of growth.  OPEC restrictions are in place and should continue to restrict supply. As production becomes more profitable with surging crude prices, we will continue to watch how upstream suppliers further increase activity.

Independent oil traders such as Vitol SA and Gunvor Group Ltd. have recently advised caution about the recent surge in crude prices. While the upward trajectory is a welcome development for many, prices may prematurely reflect optimism from vaccine roll-out and confidence that production restrictions will hold. Advisors at both trading companies have noted key technical indicators signal crude is in overbought territory and predict a correction may be in store. Will be something to watch in the days and weeks ahead.

Tom McNulty, Houston-based Principal and Energy Practice leader with Valuescope, Inc.: Demand will continue to rise. Let’s look at China for a minute. China’s imports of crude were up in January by almost 20 percent more than they imported in December. Global demand will not be stalled; it will rise, and this will cause more energy to be produced in all forms across the complex.

Mark Le Dain, vice president of strategy with the oil and gas data firm Validere: Propane demand is reaching multi-year highs and supporting total products demand. With outdoor dining heating, this level of demand may last a little longer than historical seasons.


One Comment on "Does a Correction Loom for the Oil Market?"

  1. Roger on Mon, 15th Feb 2021 8:27 pm 

    Oil going to da moon!!!
    Stay long…stay strong…get rich. Once in a lifetime opportunity.

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