2 min read.Updated: 05 Apr 2021, 11:01 PM ISTBloomberg
After global benchmark crude futures last month suffered their worst week since October, Brent has struggled to break past $65 a barrel ahead of a full-fledged global demand recovery
Oil accelerated its decline after Britain warned it may continue limiting foreign travel, dampening hopes for a summer travel boom.
Futures in New York fell as much as 5.9% on Monday, sending prices markedly below their 50-day moving average. The U.K. may delay global travel beyond May 17 if coronavirus infections continue to surge elsewhere around the world, adding further pressure on the immediate trajectory for consumption as governments struggle to control the spread of Covid-19.
Meanwhile, Iran, the U.S. and the remaining members in the 2015 nuclear deal are set to gather in Vienna on Tuesday to discuss potentially resurrecting the agreement, presenting a possible path toward removing sanctions on the Middle Eastern country’s oil exports. Yet, Iran indicated talks won’t succeed without the U.S. fully removing sanctions.
“The scales got tipped here in terms of relative oversupply for the first time in a while," said John Kilduff, a partner at Again Capital LLC. “There’s certainly a sense in the market that the easing tensions in Iran are going to enable a topping up of supplies to the market from the country."
After global benchmark crude futures last month suffered their worst week since October, Brent has struggled to break past $65 a barrel ahead of a full-fledged global demand recovery. More Iranian supply coming back to the market and renewed lockdowns complicate the picture for OPEC and its allies, which agreed last week to raise production by more than 2 million barrels a day over the next several months. Iran’s exports of crude, condensate and oil products could easily reach as much as 2 million barrels a day in the coming months amid a relatively muted U.S. response to higher shipments, according to consultant FGE.
Still, Goldman Sachs Group Inc. still sees “a lot more" output being needed over the northern hemisphere’s summer to meet rising demand, and OPEC+ can adjust their decision as needed when it meets next at the end of April.
Saudi Arabia on Sunday raised prices for May oil shipments to Asia. Aramco, the state energy firm, will increase its grades to the region by 20 to 50 cents a barrel from April. Most prices for northwest European customers won’t be changed, while most grades to the U.S. will be cut by 10 cents. The move hinted at Saudi Arabia’s confidence in Asian demand recovering further.
Brent’s nearest timespread remained in backwardation since last week -- a bullish pattern in which near-term prices trade at a premium to those further out -- signaling tightening supplies.