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Weekly Energy Recap: Oil Selloff Was Transient

By Faisal Faeq CommoditiesJul 25, 2021 04:38AM ET
Weekly Energy Recap: Oil Selloff Was Transient
By Faisal Faeq   |  Jul 25, 2021 04:38AM ET
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Though oil prices experienced an extremely volatile week, they made the first weekly gain after two weeks of deterioration. Early in the week, prices dropped to below the $70 mark and then rebounded back on strong market fundamentals.
The July 19 market selloff that resulted in the biggest single-day drop in prices this year so far, didn’t continue to weigh down further on oil prices as it was transitory and offset by the strong market fundamentals. On the contrary, it resulted in more optimism regarding gasoline and diesel demand.
At the begging of the week, the market overreacted to the OPEC+ supply increase, and prices plummeted by 12%, but that was swiftly offset by recovering global oil demand. Since transitory, it inversely cemented OPEC+ output cuts easing oil prices to rebound back above the $70 mark, which proved OPEC+'s decision to be right.
On the week closing, Brent crude price ended the week higher at $74.10 per barrel. WTI ended the week higher at $72.07per barrel. The Brent/WTI spread has widened to $2.03 per barrel.
The news about China's oil imports decrease in the first half of 2021, compared to the first half of 2020, as the first drop in 8 years, wasn’t a negative signal and didn’t weigh down on oil prices as the market acknowledged that China imported and stored huge amounts of oil while prices hit historically low levels during the first half of 2020.
Also, the surprise climb of the US crude inventories by 2.1 million barrels following eight consecutive weeks of declines didn’t weigh down on oil prices. Petroleum refined products refining margins are holding up, which should further contribute to a tightening market.
In the July Short-Term Energy Outlook (STEO), EIA forecast the Brent crude oil price to average $72 per barrel in the second half of 2021 and $67 per barrel in 2022, both being $6 per barrel higher than in the June STEO forecast.
The latest figures from the Commodity Futures Trading Commission (CFTC) on July 20, 2021 showed that long positions on crude oil futures on the New York Mercantile Exchange (NYMEX) numbered 593,580 contracts, dropping by 50,041 contracts from the previous week (1,000 barrels for each contract).
Weekly Energy Recap: Oil Selloff Was Transient

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Weekly Energy Recap: Oil Selloff Was Transient

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Wahyu Antariksa
Wahyu Antariksa Jul 25, 2021 1:04PM ET
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