Crude oil prices suffered their biggest weekly loss since October, despite chalking up gains at the last trading session of the week amid fears over energy demand due to renewed lockdowns and an unimpressive vaccine rollout in parts of Europe.
What you should know
For the week, U.S based oil contract, West Texas Intermediate futures plunged by 6.4%, and Brent crude futures dropped by 6.8%, the biggest declines since October for both major oil benchmarks.
Oil bears took hold on the energy market as reports revealed safety concerns surrounding the AstraZeneca COVID-19 vaccine; however, the Germans and other European countries changed the narrative by disclosing a resumption of vaccinations, which helped curb the selling pressures.
In a detailed analysis sent to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, gave other key insights weighing on the viscous hydrocarbon despite OPEC+ resolve in keeping oil production at controlled levels.
“What started as a profit-taking correction triggered by a vaccine health scare has now moved into a whole out price level correction. The sell-off in oil is getting compounded by risk-off moves in cross-asset correlations as the market continues to price in tighter financial conditions despite the Fed’s effort to suggest the contrary.
But at the heart of it all, the rally was mainly on the back of OPEC+ production cuts—or rather, the fact that they agreed to hold production steady in April instead of ramping up production as the market had anticipated.”
Oil pundits anticipate that the energy market is experiencing a bit of reality check these days as the supercycle bulls may be giving way to the power of spare capacity as the thought of more barrels coming back continues to provide the medium-term supply headwind.