Energy Prospectus

Prices at 1pm CT:
> WTI prompt month (MAR 21) was down $0.04 on the day after Monday's $2.25 gain, to $61.66/Bbl.
> In contrast, NG prompt month (MAR 21) was down $0.116 on Monday, to settle at $2.953/MMBtu and drifted lower to $2.873 as of 1PM CT.

Bank Of America Sees $70 Oil By Summer
By Tsvetana Paraskova - Feb 23, 2021, 1:00 PM CST

Brent Crude prices could hit $70 a barrel in the second quarter of 2021, while they were set to average $60 this year, Bank of America said this week, raising its average price outlook by $10 a barrel from its previous projection.
> Easy monetary policy in major economies, as well as tighter oil supply due to the OPEC+ production cuts and the Texas Freeze, are the key drivers of Bank of America Global Research’s increased price forecasts for both benchmarks this year. While Brent Crude is seen averaging $60 throughout this year, the U.S. benchmark, WTI Crude, is expected to average $57 in 2021.

“The big Texas freeze in the past week should reduce global inventories by an additional 50 million barrels, further supporting (oil) prices,” BofA said in a note dated Monday, as carried by Reuters.

Oil prices erased earlier gains and traded lower at 9:35 a.m. ET on Tuesday, with WTI Crude still above $61 and Brent Crude above $65 a barrel.

Oil prices spiked on Monday on a slow restart of U.S. oil production lost in the Texas storm and analysts upgrading their forecasts, predicting a tighter market and prices rallying faster and higher on expected lower inventories.

Echoing Bank of America, Morgan Stanley also sees Brent touching the $70 mark this year, but a bit later—in the third quarter, expecting “a much-improved market,” including on the demand side.

On Sunday, Goldman Sachs started the investment banks’ upgrades of oil price forecasts, expecting Brent Crude prices to hit $75 a barrel in the third quarter this year, on the back of faster market rebalancing, lower expected inventories, and traders hedging against inflation.

Goldman Sachs forecast Brent Crude prices reaching the $70 a barrel mark during the second quarter of this year, and hitting $75 in the third quarter. Goldman Sachs is thus lifting its previous Q2 and Q3 forecasts by $10 per barrel.

By Tsvetana Paraskova for Oilprice.com
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If WTI goes over $70/bbl most of the Sweet 16 and our Small-Caps should double.

(Bloomberg) -- Commodities markets are booming. Oil is up about 30% this year, copper just hit a nine-year high and grains markets are experiencing shortages.

But there’s a subtler factor helping propel the value of the world’s raw materials ever higher: yield.

At a time when interest rates are feeble and bond yields remain historically depressed, rolling positions along the commodities futures curve offers passive investors tempting returns. It’s a proposition that has gotten some of the biggest research departments on Wall Street, from Goldman Sachs Group Inc (NYSE:GS). to Citigroup Inc (NYSE:C). talking up commodities returns this year. < MY TAKE: When the "Alpha Dogs" change direction, the Wall Street Herd follows.

The logic is simple. When markets are tight, nearby futures contracts are more expensive than later ones. That means investors can buy contracts today, and when they have to roll them to later months, they get the same exposure at a cheaper price, even if headline values don’t move. Over 12 months that process -- known as positive carry -- currently returns 9% in oil and about 3% in copper. It’s one of the key reasons money is now flowing back into the sector.

“If you’re in a positive carry market, it’s really a good thing,” said Greg Sharenow, a portfolio manager focused on energy and commodities at Pacific Investment Management Co. “It could be a really significant driver of returns and a really important component of how an investor performs in the next year.”

Supercharged Commodity Boom: Definitely. Supercycle? Not Exactly

The fundamental reasons behind the rally in commodities markets vary. In oil and copper markets, there’s an expectation that demand will begin to eclipse supply amid the roll-out of vaccines and loosening of movement restrictions, coupled with economic stimulus measures.

Other markets are seeing more particular factors. Sugar, for example, is benefiting from port delays and a shortage of containers to ship the sweetener, as well as smaller crops in some regions.

In the broadest terms, though, one thread links the multibillion dollar markets for raw materials: the desire of investors to profit from a rebound in the global economy and inflation.

“Part of what you’re seeing pushing these markets higher right now is that hedging demand to deal with inflation,” Jeff Currie, head of commodities research at Goldman Sachs said in an interview with Bloomberg Television. “The demand to hedge that risk through commodities is quite high.”

And that’s where the tantalizing yields come into play. In a basket of 20 commodities, net-bullish positions have risen 16% this year alone. They’re up more than sixfold since the middle of last year.

There may be more to come. Citigroup Inc. says surging demand will see copper prices hit $10,000 a metric ton in the coming months. Last week, Deere (NYSE:DE) & Co. boosted its profit outlook, with the tractor giant seeing the early days of a demand pick-up in the farming economy. Over the last 10 years, when oil yielded this much, prices were at least $10 higher, and sometimes nearer $100 a barrel.

It’s how the cycle continues. As prices rise, so-called backwardation -- in which nearer-term contracts are costlier than those for later dates -- is steadily amplified. That in turn helps attract new investment, and means prices keep on rising.

“I suspect backwardation can go higher,” Ben Luckock, co-head of oil trading at Trafigura Group said in a Bloomberg TV interview, referring to the crude oil markets. “We are very bullish what the market looks like going forward and that means backwardation is here for the foreseeable future.”

Closing Prices;
> WTI prompt month (APR 21) was down $0.03 on the day, to settle at $61.67/Bbl.
> Also, NG prompt month (MAR 21) was down $0.074 on the day, to settle at $2.879/MMBtu.

EIA reports on Wed and Thur will draw a lot of attention.