Oil futures headed for a sixth consecutive loss on Friday, with US prices on track to record their lowest end in a month, amid fears of summer energy demand given the slow introduction of European vaccines and new business closures in Italy and France in response an increase in coronavirus cases.
Oil traders have become “concerned about rising inflation, while European growth is threatened by a slow pace of vaccination, along with a resurgence of COVID cases and lockouts in Italy and France,” said Marshall Steeves, an energy market analyst at IHS Markit.
Federal Reserve Chairman Jerome Powell announced on Wednesday that the central bank will keep interest rates low until 2023 and that he expects inflation to potentially be on average above their 2% target.
“This could reduce demand for oil if consumers have less discretionary income to consume,” Steeves told MarketWatch.
“Until now, there has been an operational rapid improvement in demand during the year, and this is probably a more likely path in the United States,” he said.
However, Germany and other countries are now continuing to vaccinate against coronavirus with the AstraZeneca vaccine, following the recommendation of European regulators that the benefits of shooting outweigh the risks. The European Medicines Agency said on Thursday that the vaccine is safe, but that a link to the small number of rare blood clots reported on the continent cannot be ruled out, and patients should be told to watch out for warning signs.
West Texas Crude Oil for April delivery CL.1,
on the New York Mercantile Exchange fell 537 cents, or 0.6%, to $ 59.63 a barrel. Based on previous months, prices appear to be the lowest since February 19, FactSet data show. The April agreement expires at the end of the session on Monday. May WTI CLK21,
the contract with the most active trade fell 41 cents or 0.7% to $ 59.65.
May oil brent BRN00,
the global benchmark lost 89 cents, or 1.4%, to $ 62.39 a barrel on ICE Futures Europe, with prices heading for the lowest end in six weeks.
Both the WTI and Brent reference levels traded more than 9% lower week to date. On Thursday, futures for WTI fell 7.1%, while Brent fell 6.9% due to the biggest one-day percentage loss since June.
“There has also been a disconnect between the physical and paper markets for a long time, with the physical market weaker than futures suggest,” said Warren Patterson, head of commodity strategy at ING.
“Chinese purchases have been softer in recent weeks, while rising Iranian flows have not helped. So there seems to be an element of the futures market that comes back in line with the physical market, ”he said.
Meanwhile, Michael Tran, a commodity analyst at RBC Capital Markets, downplayed the slowdown in crude oil purchases in China, arguing that the softer physical market could be explained by the maintenance of an Asian refinery.
“Simply put, China is withdrawing fewer barrels from the open market because the units have a few more weeks of turnaround. “Headlines often call China a slowdown, but our level of belief lies in the view that the end-use indicators of demand for Chinese products are not only strong, but continue to grow,” he wrote.
Tran said he would not fight a “constructive correction” after the 70% rally from early November. “Wait for the rinsing to start. “We see the high $ 50 for WTI as an extraordinary opportunity to structurally get into the summer background of gasoline, which is the most constructive we have seen in almost ten years,” he said.
WUTI and Brent futures continue to trade 20% or more for more than a year to date.
Yet the rise in U.S. crude oil inventories in recent weeks “happened contrary to” the desired goal of the Organization of the Petroleum Exporting Countries and their allies, collectively known as OPEC +, to rebalance inventories, Steeves said. U.S. crude oil inventories recorded their fourth consecutive weekly increase in the week ending March 12.
“As a result of the difference between the US and the rest of the world, the lag has become more pronounced in Brent crude oil commodities, while WTI has been mostly in contagion or only slightly backward,” he said. In decline, futures prices are below the spot market. In contingency, prices of future deliveries rise above the spot market, which can encourage traders to store oil.
“That could change if U.S. stocks start to decline, especially if demand for refined products accelerates through the second quarter,” Steeves said. “For now, the route could send the market on Thursday to retest the lowest temperatures from January,” although traders remain “optimistic about US growth and this could lead to the floor.”
On Nymex Friday, April, petrol RBJ21,
fell 2% to $ 1.91 a gallon, trading about 11% lower during the week, and April heating oil HOJ21,
shed 0.9% to $ 1.77 a gallon, on track for a weekly loss of 10%.
Natural gas for delivery in April NGJ21,
it reached 0.3% to $ 2.49 per million British thermal units, looking at a weekly decline of about 4%.