Through Andres Guerra Luz at 04/08/2021
(Bloomberg) – Oil closed lower on Thursday, but its underlying market structure firmed as investors assessed the challenges of a global economic recovery.
West Texas Intermediate crude futures slipped 0.3% on Thursday after a choppy session. Despite the fluctuations in global prices, the oil futures curve is showing strength. The premium on the closest global benchmark Brent contract reached its highest level in one week compared to the following month. The bullish demotion pattern indicates a tightening of supplies. The so-called rapid spread of WTI has also grown stronger.
Still, signs of a mixed economic recovery weighed on benchmark crude. In the United States, where a rebound in consumption is occurring against a backdrop of widespread vaccine roll-out, jobless claims have risen unexpectedly, underscoring the unstable road ahead. Meanwhile, India, the world’s third-largest importer of oil, has reported a record number of daily Covid-19 cases, and several countries, including the Netherlands, are limiting the use of a Covid-19 vaccine due to potential complications.
“The market is waiting to see which direction this goes,” said Rob Haworth, senior investment strategist at US Bank Wealth Management. “The question is whether demand is picking up enough to absorb the increase in OPEC production?”
US benchmark crude futures have been stuck in a narrow range of around $ 60 a barrel in recent weeks. While signs of picking up demand in countries like the United States have supported sentiment, new outbreaks of Covid-19 and new lockdowns in other parts of the world have acted as a counterweight. Despite recent price setbacks, Saudi Energy Minister Prince Abdulaziz bin Salman said the country remains confident in its decision to gradually increase production.
“CTA and momentum funds remain long oil futures, but have reduced position sizes in recent days and weeks due to high market volatility and a stronger US dollar,” said Ryan Fitzmaurice , commodities strategist at Rabobank. These factors are starting to reverse, which could indicate that the liquidation phase is drawing to a close for CTAs, he said.
- WTI for May delivery slipped 17 cents to $ 59.60 a barrel
- Brent for June settlement gained 4 cents to end the session at $ 63.20 a barrel
As cases of the virus continue to worsen, the chances of a simultaneous reopening of the global economy over the summer in the northern hemisphere have diminished, analysts at RBC Capital Markets wrote in a report. However, it is possible that an easing of lockdowns could be implemented around the world during this period, they said, helping the market as the fall nears.
Facts Global Energy has increased its estimate of global oil demand growth this year to 6 million barrels per day, up 75,000 barrels per day from its previous forecast. Yet UK government modeling shows that easing restrictions can lead to more hospitalizations and deaths, FGE said. If applied to the rest of the world, such a scenario would see a significant slowdown in the recovery in consumption.
Meanwhile, the evolution of talks between Iran, the United States and other world powers surrounding the resumption of a 2015 nuclear deal adds further complexity to the supply and demand equation. of the market. Iran’s chief negotiator at the talks in Vienna said the parties were focused on removing U.S. sanctions in one step, according to a statement that did not specify what Tehran was offering in return. The United States has yet to respond to comments.
- The Bakken oil field in North Dakota, once the crown jewel of America’s shale, is losing its luster, Goldman Sachs Group Inc has warned.
- U.S. oil and gas producers may be able to borrow a bit more from banks this spring as the industry recovers from its pandemic-stricken downtown, according to an investigation by law firm Haynes and Boone.
- In Europe, the slowdown in driving has pushed up gasoline prices, with local refineries increasing their exports – but producing less – of fuel.
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