U.S. oil plunged more than 6% to lose the $60 mark, hitting the lowest since March 25 along with the cloth oil
U.S. stocks at midday, U.S. oil WTI May futures fell as deep as $3.82 or 6.2% intraday to a daily low of $57.63, falling below $61, $60, $59 and $58 four hurdles in a row during the day, falling to a low since March 25.
International Brent June futures fell as deep as $3.61 or 5.6% during the session to a daily low of $61.25 and three levels of $64, $63 and $62 in a row during the day, also setting a new low since March 25.
Earlier on Thursday, despite the OPEC+ decision to increase production by a total of more than 2 million barrels per day between May and July, international oil prices still collectively closed strongly up more than $2 or more than 3%, WTI ended two weeks of decline and erased all the losses of the previous week, and the oil of cloth rose for two consecutive weeks.
Compared to what was shown a few months ago, the likelihood of the U.S. lifting sanctions on Iranian oil exports has increased. Energy consultancy FGE believes that Iran’s exports of crude oil, condensate and oil products could easily reach 2 million barrels per day in the coming months.
According to Xinhua, a State Department spokesman confirmed that the U.S. side will participate in a meeting in Vienna starting Tuesday, April 6, and is not expected to talk directly with Iran at this time, but “remains open to the idea” that “we have agreed to participate in talks with Europe, Russia and the Chinese Communist Party to identify the topics needed to return to compliance with the Iran nuclear deal together with Iran. Iran nuclear deal.”
As the parties to the Iran nuclear deal said in a statement following the April 2 videoconference, there is a prospect of a full return to a comprehensive Iranian nuclear deal, and the Vienna meeting hopes to identify measures to lift sanctions and implement elements of the deal.
The words “lifting sanctions” have raised concerns that Iranian crude exports are about to resume and that the U.S. may no longer impose aggressive Trump-era sanctions on Iranian crude purchasers. This could disrupt market forecasts for crude supply and demand for the rest of the year.
Reuters had quoted a senior EU official, who declined to be named, as saying, “We are discussing the list of nuclear obligations (that Iran should fulfill) and the list of sanctions (that the U.S. side should) lift …… I think we can do it within two months.”
Michael Lynch, president of consultancy Strategic Energy & Economic Research, noted that oil prices are under pressure today, not only because investors are digesting OPEC+’s decision to gradually increase production, but also because the market is feeling “pressure to ship more oil even before a renewed Iran nuclear deal is reached Pressure to ship more oil out of Iran”.
According to Globes, in July 2015, Iran reached a comprehensive agreement on the Iranian nuclear issue with the United States, the United Kingdom, France, Russia, the Communist Party of China and Germany. In May 2018, the U.S. government unilaterally withdrew from the Iran nuclear deal and subsequently reopened and added a series of sanctions against Iran. since May 2019, Iran has gradually suspended some of the provisions of the Iran nuclear deal, but promised that the measures taken are “reversible “. Currently, the U.S.-Iranian tug-of-war around returning to the Iran nuclear deal is at an impasse. Iran has repeatedly said that the U.S. must first lift all sanctions; while Washington has stressed that Tehran must first resume fulfillment of the comprehensive agreement.
Europe, India epidemic backlash tightens embargo measures, shattering expectations of strong demand rebound
Meanwhile, the renewed plunge in oil prices is not unrelated to the resurgence of epidemics in major oil-consuming countries/regions such as Europe and India. There are concerns that expectations of a strong rebound in demand may not materialize, sending the oil market into renewed turmoil.
Germany, France and Italy, the top three economies in the Eurozone, are tightening restrictions against the epidemic due to the backlash and slow vaccination.
India, the world’s third-largest oil importer, has seen the epidemic spiral out of control, with the highest increase in new confirmed cases in the country’s history since the outbreak last Sunday and becoming the second country after the U.S. to add more than 100,000 cases in a single day. Some parts of India, including its largest city Mumbai, have resumed their anti-epidemic lockdown.
This has all caused investors’ expectations on the demand side of crude oil to deteriorate, with U.S. oil WTI falling below its key technical 50-day average level. Although international oil prices are still up more than 20% so far this year, they are more than 13% lower than the 14-month high set in mid-March, entering a technical level consolidation range.
Data from the CFTC, the U.S. Commodity Futures Trading Commission, also showed that in the two weeks ended March 30, hedge funds and other speculative investors have reduced their net bets on rising U.S. crude oil prices.
Some analysts say oil prices rose instead of falling after OPEC+’s surprise decision to increase production last week, largely taking it as a sign of a recovery in demand. But Jim Ritterbusch, president of energy consulting firm Ritterbusch & Associates, said bluntly that last week’s strong bullish reaction was overdone.
Financial media CNBC also analyzed that increased supply from OPEC+ and the possibility of a resumption of Iranian exports offset the positive factors of a strong rebound in the U.S. economy and the expectation of a full recovery in oil demand in 2021.
Analysis: market overreaction, oil prices technical levels and real demand are bullish signals
At present, advocating the imminent arrival of the commodity “super cycle” of Wall Street “flag bearer” Goldman Sachs is still long oil prices, the reason is that the Northern Hemisphere summer oil demand is growing, the need for more production to meet, July to October OPEC + daily production and Goldman Sachs There is a 2 million barrel gap in demand expectations, and OPEC+ could also adjust its decisions as needed when it holds its next meeting in late April.
Meanwhile, Saudi Arabia raised the price of its May oil sales to Asia on Sunday, and the increase was larger than the market and customers had expected, hinting at Saudi confidence in a further recovery in Asian demand.
Peter McNally, global head of industry, materials and energy at consultancy Third Bridge, noted that seasonally, demand will get better and “the consensus is that the market can absorb more oil supply and that oil stocks will continue to fall even if supply increases.”
Henry Rome, an analyst at Eurasia Group (Eurasia), one of the world’s largest political risk consultancies, also expects that sanctions such as U.S. restrictions on Iranian oil sales will be lifted only after negotiations to restart the Iran nuclear deal are completed and Iran is back in compliance with the agreement.
Technically, Brent crude oil has been at a spot premium (backwardation, also known as forward discount) since last week, meaning that the spot month futures price is higher than the forward price, which is a bullish signal at the short end, representing tightening supply and relative market optimism for the near month.
This may imply that the recent decline in oil prices is only a short-term correction, Goldman Sachs, including many mainstream investment banks believe that oil prices will surge up to $ 80 this summer, in late March its research report said, “the current decline in the crude oil market actually exists buying opportunities”:.
Global crude oil demand will increase significantly in the coming months as the pace of vaccinations in Europe and the United States gradually accelerates. Higher immunization coverage will drive higher crude oil demand in the aviation sector. The U.S. infrastructure stimulus program will also boost the crude oil demand base, with Goldman Sachs expecting a related lift of 300,000 bpd.
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