Brent crude retreats after briefly topping US$70

16 Mar 2021

Brent futures have steadily retreated after briefly topping US$70 a barrel on Monday, a level the global benchmark has failed to sustain. US crude futures also declined, and trading volumes were below average levels.

China’s industrial output surged in the first two months of the year, underscoring the strength of its V-shaped rebound and reinforcing expectations for increased energy demand.

But there are some less positive signs in the short-term. West Texas Intermediate crude’s nearest timespread flipped into a bearish contango structure – signalling oversupply – after stockpiles in the US grew in recent weeks.

Crude has rallied this year, aided by COVID-19 vaccines and OPEC+ continuing to keep a tight rein on supply. Citigroup Inc raised its full-year forecast for Brent and is predicting it may even hit US$80 a barrel in the next few months. Signs of demand recovering have been mixed around the world, with some investors remaining cautious.

China processed more than 14m barrels a day of crude in January and February, and refiners have kept consumption above that level every month since June. There are also bullish demand signs elsewhere, with US air passenger numbers hitting a 12-month high on Friday, while road use is creeping up in parts of Europe.

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