Oil Market Plunges 15%: What's Next?

It has been a "black" week for the entire hydrocarbon market. Brent quotes retreated to $60 support, bringing the general decline, which continues for the second consecutive week, to 15%. Let us recall that Brent traded at $70 per barrel in the middle of this month and had all the fundamental grounds to keep rising.

Market sentiment hit a bump amid concerns over the COVID-19 third wave, which may be now commencing in Europe. A significant increase in the number of coronavirus cases has forced several European countries to reintroduce lockdown measures, which could slow down oil demand recovery. France and Italy were the first to report national lockdowns with Germany joining later. Chancellor Angela Merkel said restrictions would be in place through Apr. 18. Thus, the main economic "locomotive" of the Euro bloc has basically gone off the rails, shaking traders' confidence in the Eurozone's rapid economic recovery. The situation was further aggravated by the issues with AstraZeneca (NASDAQ:AZN) vaccine. Several EU countries halted the vaccination due to a number of disconcerting side effect reports. At the same time, more than 70% of those who signed up for the AstraZeneca shot in Poland refused the injection, even though the country did not ban it.

Mass media have been running a massive campaign aimed at restoring confidence in AstraZeneca. On Monday, the company announced that its COVID-19 vaccine proved to be 79% effective in the US clinical trials, which involved more than 32,000 people. AstraZeneca plans to request US emergency authorization for the vaccine in the coming weeks. It is worth noting that the American trials have been the largest and could boost confidence in the vaccine after a setback in Europe when a small number of patients suffered blood clotting after vaccine application.

Experts believe that the use of the AstraZeneca vaccine will be resumed in the next few days. The Directorate-General for Health and Food Safety said that coronavirus vaccine shipments should reach 70% of the target in the second quarter. As soon as vaccination continues at the same pace, concerns about a longer global economic recovery will abate, which should give oil prices an additional boost. Coupled with more robust demand from China, the gradual lifting of restrictions, as well as the strong OPEC + discipline and adherence to its oil output schedule, could be more than enough for Brent to resume its bull rally. That being said, the current decline in oil prices is a good opportunity to go long betting on Brent quotes to return above the $ 70 per barrel mark.