In Tuesday’s European session, U.S. and Brent oil fell unilaterally by more than 3%. wti crude approached the $59 mark, and Brent crude also tested $62. around 19:00, U.S. and Brent oil fell below $59/barrel and $62/barrel, respectively, and Brent crude futures fell by 5% during the day.
At 21:00 the domestic futures night session opened with the main Shanghai Crude Oil contract down 3.42%.
Global blockade crisis again, oversupply signals emerge
Oil prices are once again facing a “two-pronged attack” from supply and demand as the rally stalls. On the one hand, there are renewed concerns about the near-term demand outlook.
In Asia, a surge of new cases of pneumonia in India threatens the Indian economy’s recovery from recession, while in Southeast Asia, oil demand has entered a plateau and is unlikely to reach pre-outbreak levels at the end of 2021 or beyond.
Germany, Europe’s largest oil consumer, extended its embargo until April 18 to combat a third wave of the outbreak. In the U.S., the mayor of New York City urged a moratorium on reopening and several European countries are extending or reimposing embargoes.
On the other hand, global indicator Brent crude spot spreads are near their narrowest spot premium in about two months and the bullish structure is rapidly changing to a bearish futures premium, a sign of oversupply.
Saudi Aramco lays out production increase, asks for U.S. support
OPEC+ oil production cut implementation rose to 113% in February, two sources said. Despite this, Saudi Aramco CEO said on the 22nd that we are optimistic about the oil market and very bullish on future oil demand.
Saudi Aramco is currently undertaking detailed engineering planning to increase production capacity to 13 million barrels per day and will increase oil production in the coming years. Saudi Aramco CEO said that the Saudi-Kuwait neutral zone production will increase to 300,000 barrels per day.
There is also market news that Saudi Arabia is seeking more help from the U.S. to stop the increasing attacks on oil bases, which would also provide support for Saudi Arabia to increase its oil production.
But Yemen’s Houthis rejected a Saudi initiative earlier in the day about a comprehensive end to the crisis in Yemen. In a statement released the same day, Houthi spokesman Mohammed Abdelsalam said.
“There is nothing new in the Saudi initiative to end the crisis in Yemen. Saudi Arabia is part of the war in Yemen and the Saudis must stop the blockade of Yemen.”
What’s the future of oil prices? This is how the investment banks see it ……
Wachovia Bank analyzed that energy prices were hit hard by a lot of bearish news last week, with Brent crude plunging 6.8% on the week. Buyers seem reluctant to bid above $65 and this cautious tone is expected to remain intact as the quarter draws to a close and next week’s OPEC+ meeting approaches.
Oil has been hit harder than precious metals in the face of negative factors such as a less dovish Fed FOMC and setbacks in European vaccination actions; stronger U.S. Treasury yields and the U.S. dollar have also complicated the bullish move in oil prices, while a combined increase in U.S. crude and gasoline inventories has added a layer of headwinds.
Wachovia Bank believes that if crude oil needs a technical correction, $65 would be the right level to establish long positions again. Last week’s plunge will wash away some of the overly speculative longs, and oil prices are likely to rebound slightly this week, with a medium-term range between $65 and $70.
Goldman Sachs also continues to be bullish on the medium-term outlook for crude oil, seeing a potential spot premium. Goldman Sachs says the spread between Brent and WTI crude has tightened to $3 per month; it expects the spread to remain at $3 per barrel through 2022 even if Brent crude prices rise to $75 per barrel.
Next week OPEC+ will meet again to decide on production policy for May. Jeffrey Halley, an analyst at Oanda Asia Pacific, is more cautious, predicting.
“It is now unlikely that OPEC+ will adjust its production cuts next week. I had also expected a pullback to weed out speculators, I just didn’t expect it to be this deep. In the near term, I expect oil prices to remain skewed to the downside.”
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