Oil Market Outlook
Oil prices fall last week amid concerns that a faster rise in coronavirus cases, leading to new curbs in many countries, will slow the economic recovery and cut crude demand.
The decision by Opec and its allies to gradually ease their production cuts starting from May has also raised concerns about a supply-demand imbalance.
However, longer-term optimism about the economy kept a floor under losses, after the International Monetary Fund lifted its global growth forecast to 6.0%, from 5.5% predicted in January.
West Texas Intermediate (WTI) crude fell $2.13 to $59.32 per barrel. Brent lost $1.91 to $62.95 and Dubai crude averaged $61.08. Thaioil forecasts that WTI this week will trade between $58 and $62, and Brent between $61 and $66. Prices are expected to remain under pressure from Covid-linked lockdowns. Investors are also watching tentative steps to revive the Iran nuclear accord, which could have an effect on geopolitics and the oil market. Among the factors expected to influence trade:
While consumption is climbing in the US and India, even as Covid surges in the latter, the possibility of stricter travel limits in Europe is muddying the crude demand outlook. The UK was planning to allow its citizens to holiday abroad starting on May 17 but it says that date might be pushed back. And while vaccinations are progressing rapidly, questions remain about the use of the AstraZeneca vaccine in younger people. Canada and Germany are now using it only in people aged 60-plus, and the UK is looking at a similar move.
Efforts to revive the 2015 Iran nuclear accord are showing positive signs after China, Russia, France, Germany, England and Iran discussed what steps might be needed for the US to lift sanctions imposed by Donald Trump’s administration.
Worldwide economic activity is showing positive signs, with big gains in the manufacturing purchasing managers’ index in the euro zone (to 53.2 in March from 48.8 in February) and China (to 54.3 from 51.5). The IMF, meanwhile, said the $1.9-trillion US stimulus and $2-trillion infrastructure plan would help boost the US and global economy.
US crude inventories are likely to drop further as refineries are now operating at 84% of capacity, the highest since March 2020. Inventories in the week to April 2 fell by 3.5 million barrels, to a total of 501.8 million. Crude imports fell by 140,000 barrels per day.
Economic indicators to watch include US jobless claims and March consumer prices, Chinese firstquarter GDP, and euro zone February retail sales.