US oil surges above $64 on anniversary of sub-zero plunge

Prices have since added more than $100 per barrel, following production cuts by Opec+ as well as resumption of mobility

Crude oil storage tanks at the WTI physical delivery point in Cushing, Oklahoma. WTI collapsed to below zero last year as US crude storage neared capacity. Reuters

US oil prices surged above $64 per barrel, a year after they plunged to sub-zero levels.

Prices continued to rise as inventories depleted and demand for crude remains poised for further increases this year, as the world's largest economy recovers from the Covid-19 pandemic.

West Texas Intermediate, which tracks domestic crude grades, was up 1.10 per cent at $64.08 per barrel. Brent, the international benchmark for more than half of the world's crude, was up 1.15 per cent at $67.82 per barrel at 10.23am UAE time.

"Oil prices are on the rise again following a prolonged period of consolidation – driven by rising growth expectations," said Milan Cutkovic, market analyst at Axi. "The next leg higher seems imminent, with $68 the next major level to watch in WTI."

The US benchmark has undergone a significant turnaround as the world economy is poised for a stronger but uneven recovery this year.

Global economic output is forecast at 6 per cent this year following a 3.3 per cent contraction in 2020 as Covid-19 disrupted trade, hindered travel and caused lockdowns worldwide.

Exactly a year ago, WTI collapsed to below zero, briefly trading at negative $40 per barrel, as US crude storage neared capacity.

"One year ago today oil prices were in complete free fall and WTI futures closed at -$37.63 per barrel, their first [and so far only] close in negative prices," Emirates NBD said in a note on Tuesday.

Prices have since added more than $100 per barrel, following production cuts by Opec+ as well as a resumption of mobility following vaccine distribution in major economies, the Dubai-based lender added.

Prices also gained on Tuesday after production from Libya fell below one million barrels per day for the first time in several months.

Libya's National Oil Corporation declared a force majeure on exports from Hariga Port in the east. It said the closure was due to the central bank's refusal to release the budget needed for the oil sector "for long months".

Libyan production rose to 1.19 million bpd in March, about 10 times higher than the 121,000 bpd it produced in the third quarter of last year, according to secondary Opec sources.

If the Hariga port, which has a capacity to export 120,000 bpd continues to remain shut, more than 100,000 bpd of Libyan production could be shut-in, according to Louise Dickson, oil markets analyst at Rystad Energy.

The eastern port is a key delivery point for crude output from Sarir and Messla fields.

"Although the export disruption is not of a very large scale for the moment, NOC has threatened to block exports from other facilities too, and that is why prices are rallying," Ms Dickson added.