Oil prices are down 4% as European COVID loops raise concerns about demand

Oil futures fell sharply on Tuesday, with concerns that renewed locks to combat the spread of coronavirus infection in Europe would reduce energy demand helping to push U.S. prices below the key $ mark 60.

“Optimism around a rapid global economic recovery has recently been dampened by barriers to vaccine distribution in parts of Europe and South Asia,” Christin Redmond, a product analyst at Schneider Electric, said in a market update .

Meanwhile, “U.S. refineries are still struggling to get back online after a mid-February winter storm, which has led to several consecutive weeks of crude investment construction. ”

West Texas Intermediate crude for May CL.1 CLK21 delivery fell $ 2.67, or 4.3%, at $ 58.89 a barrel on the New York Mercantile Exchange. May Brent crude BRN00 BRNK21, the global benchmark, fell $ 2.55, or 4%, to $ 62.07 a barrel on ICE Futures Europe.

Adjustment around the normal levels for WTI and Brent crude would be at its lowest level since Feb. 11, based on the months ahead, FactSet data show.

Germany, Europe’s largest economy, extended its lockout measures another month to April 18, and imposed several new restrictions in an effort to reduce the rate of coronavirus disease.

“Rising viruses in mainland Europe, where vaccination distribution has been slow, have called into question the resumption of travel in the region… Among other things, this hurts too -approval estimates for crude oil and holidays, ”Fawad Razaqzada, market analyst at ThinkMarkets, said in a note.

As Europe struggles with an extended closure, the opposite is happening in the U.S., notes Carsten Fritsch, an analyst at Commerzbank, where restrictions on easing, vaccine distribution and release of studies are expected to ease. government financial support demand for crude in the world’s largest oil-consuming countries.

The different movements were seen in the crack explosions – the difference between products from a raw barrel and the crude itself – on both sides of the Atlantic.

He noted that the gas / Brent oil spill spread in Europe is still very low, below $ 5 per barrel. In comparison, the relative U.S. spread is seen at around $ 15 per barrel.

Similarly, Brent futures have shifted into contango, a situation where futures trade at a discount of contracts to later delivery and encourage crude put in store. WTI is looking backwards, with futures trading at a higher level to later contracts.

Among other factors affecting trade, tensions between Saudi Arabian and Yemen rebels have provided some support for oil prices this month. On Monday, the Saudis proposed a ceasefire with Houthis, which is linked to Iran, in Yemen.

Political tensions in the Middle East would normally drive oil prices, but “among too many people, these factors are not at play,” said Manish Raj, chief financial officer at Velandera Energy.

Raj reported that S&P Global reported that Saudi Arabia is withdrawing from its investment to grow its exports, even though the country has made voluntary production cuts.

“Because of the picture Saudi has taken from their inventory, the market is still full of supply,” he said, adding that when OPEC + agreements call for production cuts, there is no restriction on producers’ sales from their investment.

The Saudi-led Organization of Petroleum Exporting Countries, along with their allies – known as OPEC + – plan to meet next week. Traders are looking forward to the meeting with the “hope that the group will reverse its production cuts amid the uncertainty of the demand,” Raj said.

Above in the U.S., weekly supply data will be released late Tuesday by the American Petroleum Institute late Tuesday, followed by official data from the Energy Information Administration on Wednesday.

The EIA is expected to report domestic crude supply down 300,000 barrels for the week ending March 19, according to IHS Markit, which also predicts a weekly supply increase of 1 million barrels for gasoline and 100,000 barrel for brewers.

On Nymex, April gasoline RBJ21,
lost 2.1% to $ 1.92 gallons and April HOJ21 heating oil,
shed 2.6% to $ 1.78 per gallon.

Natural gas April NGJ21,
traded at $ 2.55 per million British thermal units, down 1.4%.