Crude oil prices rallied by about 2% on Friday morning over mounting fears that it could take weeks to evacuate a stranded giant container ship blocking the Suez Canal.
Data retrieved from Lloyd’s List, a shipping data and news company revealed that the stranded mega-container ship is holding up an estimated $400 million an hour in trade, based on the estimated value of goods that are moved through the Suez Canal daily.
That being said, the black liquid hydrocarbon still heads for a third consecutive weekly decline on growing concerns of the third wave of the COVID-19 crisis.
- At the time of writing this report, Brent crude rallied by 1.8%, to trade at $63.04 a barrel after losing about 4% on Thursday.
- The major oil benchmark is on track for a moderate weekly loss, following a more than 6% drop in the past week.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics highlighted key macros that could weigh on oil prices in the midterm:
“The Suez Canal blockage’s transitory nature gave way to general nervousness around rising COVID -19 cases in Europe, India, and Brazil.
“And with an enduring safe- haven bid under the US dollar continuing to pressure oil prices, eventually, the trap door sprung and triggered a ferocious sell-off.
“And while sentiment was thrown an economic lifeline in the form of quickly repairing US job markets, it did provide a soft bed, but the bearish sentiment seemed to be winning out as the bounce was unconvincing.”
What to expect: Oil pundits anticipate that the reimposition of lockdowns in Europe would weigh more on oil prices as the resurgence of COVID-19 in hotspots worldwide does little to improve the prospect of regional travel and leisure sectors.
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.
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