After oil hits 13-month high, energy analyst warns prices may be ‘too frothy’


Oil climbed Friday, surpassing the high set earlier this week and notching a fresh 13-month peak.

West Texas Intermediate crude hit $59.74 a barrel on Friday, its highest level since January 2020, a promising sign as the industry grapples with depressed demand during the coronavirus pandemic.

However, after a 23% rally so far this year, one top energy expert warns the commodity may have gotten ahead of itself.

“My personal view … is that the price is too frothy, and that it doesn’t warrant a WTI price of greater than $58,” Regina Mayor, global and U.S. head of energy for KPMG, told CNBC’s “Trading Nation” on Thursday.

Mayor is seeing positive signs that the market conditions back higher prices than the lows seen last year, though. Lower demand and fears of prolonged lockdowns had in April 2020 turned one crude oil futures contract negative for the first time in history.

“Supply is coming down. … We’re all surprised by how quickly it’s taken to draw down those stocks and to get us closer to the 5-year rolling average,” Mayor said of what’s driving higher oil prices. “We’re [also] seeing real-life improved demand out of China and India, although I caution that the China number is a pandemic comparator for January 2020 versus January 2021, and then there are expectations that demand will increase with vaccinations and more people moving around.”

Those factors support West Texas Intermiate crude trading in the low $50s, rather than closer to $60, Mayor said. She noted that any price above $30 for WTI is profitable for the producers.

U.S. stockpiles declined to their lowest level in 11 months last week. Meanwhile, OPEC has capped its supply in February and Saudi Arabia will reduce its production by 1 million barrels a day for the next few months.


Products You May Like

Articles You May Like

Electric vehicle start-up Arrival cuts 800 jobs as it focuses on US future
Suicide bomber kills at least 47 in Pakistan mosque attack
Concerns about golden eagles are partly prompting the redesign of a Scottish wind farm
Aryna Sabalenka battles her way to first Grand Slam victory
Sunak urged to ‘come clean’ over what he knew about Zahawi tax scandal

Leave a Reply

Your email address will not be published. Required fields are marked *