Despite two key benchmarks on Friday incurring losses, oil ended 2021 with a bang, posting its biggest annual gain since 2009 and optimism for the New Year reflected in the market structure, reports Ship and Bunker.
The gain
West Texas Intermediate fell $1.78 to settle at $75.21 per barrel, while Brent dropped $1.75 to settle at $77.78 per barrel; however, WTI rose 55 percent for the biggest year-to-date gain in over a decade, and Brent rose 50 percent, the largest gain since 2016.
Also, Brent’s prompt spread was in a bullish backwardation of 43 cents per barrel, compared with a bearish contango less than two weeks ago.
Baker Hughes Co. revealed that U.S. energy firms added oil and natural gas rigs for a record 17 months in a row, with higher prices coaxing them back into action; for the year the count was up 235, compared with a decrease of 454 rigs in 2020 and a decline of 278 rigs in 2019.
Future of oil production
According to government projections, U.S. oil production is expected to rise to 11.9 million barrels per day (bpd) in 2022, compared to the all-time annual high of 12.3 million bpd in 2019 and 11.2 million bpd in 2021.
Capping oil headlines for 2021 was news that China’s manufacturing purchasing managers’ index rose to 50.3 for December, beating the median estimate of 50.
Still, that doesn’t mean 2022 won’t see its fair share of challenges: despite the Baker Hughes data, the Energy Information Administration’s latest Drilling Productivity Report, the United States had 5,957 drilled but uncompleted wells (DUCs) in July 2021, the lowest for any month since November 2017 from nearly 8,900 at its 2019 peak.
Also, Barclays has predicted that WTI will increase to an average price of $77 in 2022 and could go even higher if Covid outbreaks are minimized, allowing demand to grow more than expected.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: Ship and Bunker