Oil Steadies With Demand in Focus After Worst Week in 5 Months
(Bloomberg) -- Oil edged higher on Monday as investors looked past the uneven demand recovery around the world following crude’s worst weekly plunge since October.
Futures in New York eked out a second straight daily increase after flipping between gains and losses during the session. Oil’s demand recovery is facing a spate of near-term setbacks, particularly in Europe, including extended or reimposed lockdowns in Germany, Italy and France. In the U.S., New York City’s mayor urged the broader state to follow New Jersey’s move in pausing its reopening.
However, there’s continued optimism over consumption in the U.S. as the Biden administration unleashes a wave of stimulus. The number of passengers checking through airport security in the country rose to the highest in just over a year on Sunday. That could provide support for jet fuel, the worst-hit oil product -- at least in relative terms -- during the coronavirus crisis.
“Energy markets are fixated with the belief that we’re going to have higher prices,” said Edward Moya, senior market analyst at Oanda Corp. “Right now, these short-term headaches are not easing just yet, but there’s strong optimism that’s going to be the case.”
As crude plunged last week, the total number of futures contracts held by traders dropped by about 7% -- a sign that many in the market fled for the exit. Others are confident about the long-term outlook and a return to higher prices. Bank of America Global Research said the recent oil price pullback provides an opportunity to gain commodity exposure and hedge against unexpected inflation risks, with the bank seeing oil demand expanding at the fastest rate since the 1970s over the next three years.
There is still some residual pessimism in the market, with Europe seeing pockets of increased Covid-19 cases, said Louise Dickson, an oil markets analyst at consultant Rystad Energy AS. “If vaccination campaigns continue to face challenges going forward, 2021 may see up to 1 million barrels of oil demand per day not recovering this year, compared to a smooth recovery scenario,” she said.
Since crude’s slump last week, attention is also growing on the amount of oil Iran -- currently under U.S. sanctions -- is exporting, particularly to China. The world’s largest importer released data showing it received no Iranian crude for the first time in months, a sign supplies could be masked as originating from other countries.
Iran’s Supreme Leader Ayatollah Ali Khamenei, meanwhile, said his country was in no hurry to revive the nuclear deal, although he reiterated that Tehran was still prepared to return to the original terms of the agreement once the U.S. has lifted sanctions.
“To the extent that the JCPOA comes back into play, it could add 2 million barrels a day of Iran’s oil back to the market,” said Stewart Glickman, energy equity analyst at CFRA Research. Prices will likely face more pressure “if we start to see more news about Iran and the U.S. sitting across from each other at the table and negotiating.”
|Other oil-market news:|
©2021 Bloomberg L.P.