Oil Extends Retreat With Market Assessing Global Demand Recovery
(Bloomberg) -- Oil fell the most in a week as investors assessed the state of the demand recovery in different parts of the world.
Futures in New York slipped 0.9% on Tuesday for a third straight session of losses, following a surge earlier this month to intraday levels last seen in 2018. Though there are indications of growing demand in some parts of the world, other regions -- notably Europe -- are lagging.
Road-fuel use is picking up in India and the U.S., but in France, consumption remained 10.8% lower in February year-over-year, according to the country’s petroleum-industry federation UFIP. Meanwhile, Europe’s health ministers are discussing the future of AstraZeneca Plc’s coronavirus vaccine.
Crude is seeing “a bit of a technical breather after the big jump up,” with prices “starting to get into a sweet spot,” said Ryan Kelbrants, market broker at CHS Hedging LLC. On the demand side, economies are “opening up and we’re getting things in the U.S. going again, but some of the other countries are lagging.”
Prices pared some losses following settlement after the American Petroleum Institute was said to report that domestic crude inventories fell 1 million barrels last week, compared to expectations for growing stockpiles, according to a Bloomberg survey. It would be the first drawdown in a month if confirmed by the U.S. Energy Information Administration’s figures on Wednesday.
The OPEC+ alliance’s aggressive supply management that has helped shepherd prices up from unprecedented lows last year is facing an emerging threat of Iranian oil. Meanwhile, a full global oil demand recovery is not expected this year, according to a survey by energy investors and industry participants by Bloomberg Intelligence.
West Texas Intermediate’s nearest timespread further weakened into its largest contango structure in two months -- a bearish pattern in which near-term prices trade below those further out -- signaling short-term oversupply. However, the rest of the curve remains in a bullish backwardation.
In the U.S., drillers are pumping again following February’s freeze and nationwide stockpiles of crude have been expanding, while refineries have been slower to come back. That dynamic has helped the refining margin for gasoline surge to its highest seasonally since 2015.
A U.S. gasoline supply decline of about 4 million barrels combined with a crude inventory rise of about 5 million, “would be sufficient to bid the RBOB crack and continue a rally in energy led by the gasoline market,” Bob Yawger, head of the futures division at Mizuho Securities, said in a note.
©2021 Bloomberg L.P.