• Business - Economy
  • Updated: May 16, 2021

Oil Prices Look Bullish For The Coming Week — Here's Why

Oil Prices Look Bullish For The Coming Week — Here's Why

File photo of Oil drill

The coming week looks promising for the black gold markets, as investors are already bullish on the optimism of rising global demand.

Although worries about surging coronavirus cases in India, which happens to be the second-largest importer of crude, might cap gains, the bullish case for oil still stands.

Price optimism is growing on recent events such as the recent hacking of Colonial Pipeline, which caused major disruption in supply in the United States, and relative drawdowns in their oil stockpiles.

At the end of Friday’s trading session, the British-based oil contract, Brent crude futures recorded gains of over 2% to settle at $68.83, with the West Texas Intermediate futures settling at $65.51 a barrel after posting gains of about 2.65%.

Also, industrial activities in the United States, economic recovery in the European Union, and the reopening of western countries are expected to lever up crude prices.

Colonial Pipeline said early on Friday it had restarted its entire pipeline system and had begun deliveries in all its markets. The line is the major conduit from Gulf refineries to the U.S. East Coast. However, the U.S. capital was running out of gasoline on Friday despite the pipeline restart. According to tracking firm Gasbuddy, gas station outages in Washington, D.C., climbed to 87 percent from 79 percent the day before.

It is important to note that oil bulls are on their third-week winning streak with recent reports from the International Energy Agency revealing the global glut that built up in 2020 has been cleared. The agency had earlier lowered its energy demand expectations over the recent spike in COVID-19 cases in India. As per EIA weekly report ending May 7, 2021, currently refineries have operated at 86.1 percent of their operable capacity during last week, higher compared to the last week's capacity of 86.5 percent. Gasoline production decreased during the last week, averaging 9.6 million barrels per day. Correspondingly, the distillate fuel production has inclined during the last week, averaging a 4.7 million bpd. US crude oil refinery inputs averaged at 15 million barrels per day, which has been 223,000 barrels less compared to previous outrage.

US commercial crude oil inventories excluding those in the Strategic Petroleum Reserve reported at 484.7 million barrels, decreased by 0.4 million barrels compared to the previous week's inventories of 485.1 million barrels. At 484.7 million barrels, US crude oil inventories are at the five-year average for this time of the year. The total motor gasoline inventories during last week has increased by 0.4 million to a total of 236.2 million barrels and are about 3 percent above the five-year range.

Also, the dollar slipped on Friday after U.S. Federal Reserve officials said there would be no imminent move to tighten monetary policy in the world's biggest economy. As oil is priced in dollars, a weaker greenback makes the commodity cheaper for holders of other currencies, potentially spurring demand.

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Oluwatosin Ogunjuyigbe
Oluwatosin Ogunjuyigbe

A seasoned business content writer, financial markets analyst, and tech enthusiast.

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