Oil prices lost more than 3% at the second trading session of the week on concerns that new COVID-19 lockdown and slow vaccine rollouts in Europe will slow energy demand arbitrarily.
At the time of writing this report, West Texas Intermediate (WTI), crude futures plunged by over 3% to trade below $60 a barrel. The April contract expired on Monday at $61.55, up 13 cents from Friday, after plunging more than 6% last week.
The British-based oil contract, Brent crude futures also slumped by over 3% to $62.63, a barrel.
Oil traders are momentarily shorting oil futures on reports revealing Chancellor Merkel, leader of Europes biggest economy & other regional leaders agreed to put the country into hard lockdown over Easter to try to reverse a “third wave.
Good Morning from Germany where Chancellor Merkel & regional leaders agreed to put country into hard lockdown over Easter to try to reverse a “third wave.” All stores will be shuttered from April 1 for 5 days, except for food stores which will open on Apr3 https://t.co/UajRFLwtNO pic.twitter.com/M76L6QIHQB
— Holger Zschaepitz (@Schuldensuehner) March 23, 2021
Oil traders are currently undergoing a reality check on the account that oil energy demand still has a long way from a full demand recovery, and it’s the record levels of withdrawn production capacity that’s the main prop for the oil market.
So, having crested $70/ barrel on sentiments alone, prices were always vulnerable to a pull-back.
Oil prices surge over China’s growing appetite for energy
British based contract ticked up by 0.3% to trade at $63.59 a barrel while the WTI futures edged near $60 a barrel.
Oil prices rallied high at the second trading session of the week as data from the world’s second-largest oil consumer’s (China) import growth picked up coupled with rising tensions in the Middle East after rebels from Yemen disclosed that they fired missiles on Saudi’s energy infrastructure.
At the time of writing this report, the British based contract ticked up by 0.3% to trade at $63.59 a barrel while the West Texas Intermediate futures edged near $60 a barrel.
The world’s second-largest economy recorded impressive gains for last month in yet another boost to China’s economic recovery as global demand gained momentum. Crude oil imports into China surged by 21% in March from a low base of comparison a year earlier.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the parabolic of the energy market, as oil traders seem to be uninspired on the resurging COVID-19 virus;
“The oil market’s magnetic attraction to the $63 level should tell us much about the near-term outlook amid conflicting signal of new Covid waves coming to shore ahead of what should be a summer gasoline buying bonanza.
But overall, this is an oil market that feels completely uninspired outside of a few micro lurches here and there.
Still, positive comments on the US economy from Fed Chairman Powell help to reassure the outlook for oil demand, balancing concerns about the continued spread of Covid-19 in some regions.”
What to expect
Recent price actions suggest oil traders might hold the $60 a barrel baseline in the near term even if U.S Treasury yields surge while struggling to resolve with what form and fashion the next leg of the reflation trade will take.
Oil prices stay on course as Saudi’s Energy Minister reassures traders
British based oil contract traded at about $63 a barrel while the WTI futures were trading slightly below the $60 price level.
Crude oil prices remained relatively firm at the early hours of Friday’s trading session as oil traders digested Saudi Arabia’s defense of OPEC+ plans in raising output thereby capping gains.
At press time, the British based oil contract traded at about $63 a barrel while the West Texas Intermediate futures were trading slightly below the $60 price level.
Saudi energy minister Prince Abdulaziz bin Salman recently revealed that there were no pressing concerns of demand/supply dynamics changing gear amid the gradual boost in outputs in an interview aired on Thursday, adding that OPEC+ had all ammunition put in place to change course if necessary. OPEC+ will continue to meet monthly on reviewing the energy market supply dynamics.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the prevailing market sentiment amid macros pointing to more oil supplies hitting the sensitive energy market and an upsurge in COVID-19 caseloads.
“Positioning is much cleaner, although the market remains directionally long oil. However, the sudden calm and drop in volatility have attracted passive investors back to the fray as the market structure around prompt spreads start to tighten and the dollar begins to roll over.
“Still, the conflicting signals around OPEC+ supply coming back to market amid spiking coronavirus case numbers in India plus parts of Canada as well as Tokyo backtracking into the lockdown Abyss, together with reports linking the UK’s Covid-19 vaccine workhorse to the higher frequency of blood clots, continues to hold the bulls at bay.”
What to expect: The most recent OPEC+ agreement on releasing barrels into such present demand was not out of place – suggesting the futuristic price of oil might range between the $60 -$70 price levels with production normalization vs current high excess production capacity taken into consideration.
Nairametrics | Company Earnings
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- VFD Group set to raise additional capital of N9.01 billion through rights issue and private placement.
- GT Bank records a 9% dip in profit to N45.55 billion in Q1 2021.