© Reuters.
By Barani Krishnan
Investing.com – Oil is struggling to recover from its strong rise of the past four months as Covid-19’s new closures in Europe weigh on crude oil prices, trying to recover from the worst week since late October.
Trading in New York, the benchmark for U.S. crude oil, swung between red and green all day before settling at just 15 cents, or 0.2%, at $ 61.55 a barrel. While the WTI rise increased by 2.4% from Friday, it barely moved the needle for a market that was desperate for a sentiment increase after the net tumble of 6.4% last week.
The London trade, the global benchmark for crude oil, reached a meager 9 cents, or 0.1%, at $ 64.53. Like WTI, Brent also rose 2% on Friday, while the week is lower, by 6.8%.
Last week’s tumble was the first significant drop for crude markets after a nearly five-month rally with few stops contributing almost 90% to prices.
Crude prices could hardly break new ground on Monday after a meeting chaired by German Chancellor Angela Merkel decided to tighten the restrictions on Covid-19, and then the recent easing, as the infection rate in Europe’s largest economy to more than 100 per 100,000 inhabitants increased.
According to a draft government plan discussed during the meeting, closures would be extended until April 18, varying in intensity according to region and impact.
Covid-19 infections in neighboring Poland are also more than three times higher than Germany’s, while Italy – Europe’s number 1 hotspot for the virus during last year’s outbreak – a nationwide exclusion during the Easter weekend of April 3 to 5 was.
Fawad Razaqzada, analyst at London’s ThinkMarkets, said oil had fallen from an unprecedentedly low base – especially from the point of WTI’s negative price of minus $ 40 a barrel last year – and historically high OPEC cuts, backed by optimism now about economic reopening on Covid-19 vaccinations and the promise of greater travel that could drive fuel demand.
However, crude prices could still struggle because US supply could grow faster than demand, he said.
“I do not see oil prices rising much further. “I think Brent will struggle to stay above $ 70 and reckon WTI will average $ 60 a barrel in 2021,” he said.
‘The downward momentum may have already started after last week’s sell-out. Although I think demand will continue to improve as more economies ease travel restrictions in the coming months, the impact of this will be offset to some extent by rising oil supplies. OPEC + will slowly ease supply constraints, while US shale production is likely to increase due to attractive oil prices. ”
Before last week’s dip, crude prices rose virtually unidirectionally – on OPEC +’s production cuts, the promise of economic reopening due to the closure of Covid-19 and a major US pandemic relief that was underway. From just under $ 36 a barrel on October 30, WTI rose by March 8 to just under $ 68. Brent rose from just under $ 38 to just over $ 71 in the same piece.
But at that time, the anemic demand for aircraft and other transportation fuels was virtually overlooked as global travel was severely curtailed by the pandemic. Europe’s ongoing battle with new outbreaks of infections; his alarmingly slow rate of vaccinations; and fresh connections on the block were also treated with little seriousness.
On Thursday, however, this concern came to a head, exacerbated by the 13-month high in bond yields, and the rise in the to nearly 92. WTI fell to $ 58.20, while Brent fell to $ 61.45, both a five-week low. .
Data Friday also showed that U.S. drillers are also beginning to benefit from an earlier rise in prices of optimism over the return of demand, which has added most oil-extracting equipment since January in the week to Friday.
The, an early indicator of future production, rose nine to 318 last week, the highest since April, energy services firm Baker Hughes Co said in its well-followed report.
The count has risen over the past seven months and is nearly 70% higher than a record low of 244 in August.