Crude oil and crude ETFs are gaining again Wednesday after sliding on Tuesday following a surprise U.S. inventory build reported by the API. Oil is also bolstered by a struggling restart to U.S. oil production lost during the Texas Freeze and a weaker U.S. dollar.
U.S. benchmark West Texas Intermediate crude oil gained 2.25% or $1.39 to trade at 63.05, having traded as high as $63.37.
Crude ETFs gained amid the news as well, with the United States Oil Fund (USO) adding 1.56% and the ProShares Ultra Bloomberg Crude Oil (UCO) gaining 3.00%.
Earlier on Wednesday, oil prices were struggling after their losses Tuesday, but gained traction in the morning after the U.S. dollar weakened.
Crude oil burst past its fresh one-year high of $63 a barrel that was made on Tuesday, after the API industry report contradicted surveys and reported the first rise in U.S. crude oil stockpiles in five weeks, Saxo Bank strategists said early on Wednesday, noting that both benchmarks are “still in overbought territory.”
“With US producers having restored around 80% of lost production after the Texas freeze, the focus will increasingly turn to the outcome of next week’s OPEC+ meeting,” Saxo Bank said.
Many analysts have raised their oil price forecasts in recent days, expecting oil prices to rally into the summer amid an increasingly tighter market, as well as due to last week’s events in Texas, which will likely boost oil prices for some time as production restarts slowly.
Bank of America even said this week that overseas benchmark Brent Crude prices could reach $70 a barrel in the second quarter of 2021, and will average $60 this year, lifting its average price outlook by $10 a barrel.
“The 12-month Brent spread is quickly approaching a backwardation of US$7/bbl. This steepening of the forward curve is obviously increasing roll yields, and so making oil an increasingly attractive option for investors,” ING strategists Warren Patterson and Wenyu Yao said on Tuesday.
For investors looking for crude ETFs to play the run-up in oil, which has been fairly steady since November, the United States 12 Month Oil Fund (USL) and the iPath Pure Beta Crude Oil ETN (OIL) are two funds to consider.
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