Oil falls over demand concerns

Oil suddenly plummeted in London over concerns about the outlook for demand and how the futures curve into a structure reflected near-term weakness.

Brent futures fell as much as 5 percent. There are concerns about the prospect of spending with COVID-19 compliance cases in India and threatening recovery from the economy from recession. Germany will extend its invitations and suspend Easter, and in the U.S., the mayor of New York City urged him to halt reopening.

More technical factors were also pushing prices. Brent’s nearest futures contract was trading at a discount until next month for the first time since January – a pattern known as contango that indicates they are over-making – after predictable sales in the few days gone by. Meanwhile West Texas Intermediate fell below the 50-day moving average for the first time since November.

Tuesday’s sales were the latest downward trend in a turbulent week in the oil market. Weaknesses in physical markets have grown recently, which along with regenerative coronavirus in some parts of the world has slowed raw crude. OPEC +, which is holding on to product cuts in a bid to raise prices, could be wary of any future supply surge when it meets next week if prices keep on the back foot.

“The road to oil demand seems to be full of obstacles,” said Bjornar Tonhaugen, head of oil markets at advisor Rystad Energy. “The depth of the correction is surprising in a way, given that we are just a week ahead of the forthcoming OPEC + ministerial meeting on April 1 and that US fiscal stimulus is expected to boost market confidence. . ”

But the sentiment in wider markets was also hurting sentiment. The dollar climbed, making commodities at the price of the currency more expensive and a show in U.S. Treasury showed a downtrend, adding to the risk off mood.

The weakness in the closest part of the futures curve comes as stocks taken last year are being removed from storage, according to consulting Power Advisors. The contango structure is unlikely to survive as the removal of oil from deposits is part of the ongoing rebalancing of the market, the adviser said.