ENB Publishers: Markets reminded that CIVD exists (who knew?) driving prices down below $52
Singapore — 0243 GMT: Crude oil futures fell during the mid-morning trade in Asia Jan. 22, as pandemic concerns heightened amid a lack of new drivers.
At 10:43 am Singapore time (0243 GMT), the ICE Brent March contract was down 58 cents/b (1.03%) from the Jan. 21 settle to $55.51/b, while the March NYMEX light sweet crude contract was down 60 cents/b (1.13%) to $52.53/b. The Brent marker had risen 0.04% to settle at $56.10/b on Jan. 21, with the NYMEX light sweet crude marker falling 0.34% to $53.13/b.
After the commotion of US President Joe Biden’s inauguration subsided, the escalation of the pandemic once again became the focal point of the market’s attention. The UK suffered its worst day of the pandemic in the week of Jan. 17, when the country registered more than 1,800 deaths, while fresh outbreak in multiple Chinese cities also sparked fears that the country could experience another debilitating wave.
Chinese authorities have already imposed mobility restrictions in affected cities, and have called on citizens to refrain from any travel during the upcoming Lunar New Year holidays.
With oil demand from the pandemic-stricken western hemisphere already weak, market analysts fear that tougher and longer lockdowns in China could further exacerbate the situation, and send prices falling.
“The news that China is restricting travel ahead of the Chinese New Year holiday underscores the severity of the recent uptick in infection numbers and concerns about oil demand in the world’s second-biggest consumer,” said Stephen Innes, chief global market strategist at AXI in a Jan. 22 note. “The spread of [the coronavirus] in China is the most significant demand-side risk in Q1,” Innes added.
Meanwhile, the market continued to ruminate over the impact that the Biden administration will have on the oil market. While analysts agreed that the administration’s focus on pushing through additional stimulus measures and on containing the pandemic bodes well for oil demand in the near-term, there remained consternation over the administration’s green legislative agenda.
“The US oil industry is also bracing itself for a period of upheaval following the inauguration of Joe Biden as President,” said ANZ analysts in a Jan. 22 note.
“One of his first moves was to block the Keystone pipeline project. Biden has also said he will look to limit the drilling activity on federal land and waters, possible hindering US shale’s growth,” they said.
