Singapore — 0307 GMT: Crude oil futures were lower during mid-morning trade in Asia March 22, as investors remained nervous following the panic sell off on March 18, while the prospect of an extended mobility restriction in Europe threatened the market’s rosy demand outlook.
At 11:07 am Singapore time (0307 GMT), the ICE Brent May contract was down by 13 cents/b (0.2%) from the March 19 settle to $64.40/b, while the May NYMEX light sweet crude contract fell 13 cents/b (0.21%) to $61.31/b.
The slip in prices this morning comes after the March 18 selloff, which created an atmosphere of uncertainty in the market, with investors questioning the sustainability of this year’s oil price rally.
Market sentiment has also been dampened by extended lockdown measures in Europe, which have cast a shadow of doubt over initial expectations of an expedited recovery in global oil demand. According to media reports, France and Germany have added lockdown measures to combat a sharp rise in COVID-19 infections, with other countries across Europe, including Germany, considering the same.
“Traders are getting a little jittery as a slow vaccine roll-out in Europe has raised questions over how quickly the region can control the pandemic, and also because key European economics are considering third-wave lockdowns,” David Lennox, resource analyst at Fat Prophets, told SP Global Platts March 22.
Some analysts also said the market has been increasingly apprehensive over the April OPEC+ meeting, which would provide guidance on the coalition’s production plans for May onwards. OPEC+ cuts, which have taken up to 8 million b/d of oil supply out of the market, have been a key pillar of support for prices, and an easing of these cuts could send the market spiraling downwards.
Lennox, however, painted a more reassuring picture, saying that while the coming OPEC+ meeting is certainly at the back of the market’s mind, the coalition “has been very accommodative to the market and traders generally expect this to continue.”
Despite the recent downtrend in prices, analysts remain broadly optimistic over the outlook for the market. Axi’s chief global market strategist, Stephen Innes, said in a March 22 note that the impact of a European lockdown will be muted, and that fundamentals are not sufficiently weak to justify a sustained selloff in the market.
“The recent US inventory builds are primarily in the rear-view mirror, and renewed European lockdowns likely do not signify a big step down from already-low December refinery runs, so I don’t suspect oil prices will shift too far lower,” Innes said.
