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Oil Down 3.5% on Week; Demand Concerns Offset Euro Vaccine Progress

CommoditiesApr 09, 2021 03:34PM ET
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© Reuters.

By Barani Krishnan

Investing.com - Oil prices fell as much as 3.5% on the week as concerns over summer fuel demand offset news that Europe appeared to be finally turning the corner on its Covid-19 vaccine crisis.

Germany doubled the number of daily Covid-19 vaccinations, France hit a key immunization milestone a week ahead of schedule, and Italy was set to ease lockdown restrictions as contagion rates slow, reports said on Friday.

Yet, both U.S. crude and global benchmark Brent fell more than $1.50 per barrel for the week on concerns over how demand for gasoline, diesel and jet fuel will fare in the second quarter, which typically marks the seasonal pickup for travel that lasts through early in the third quarter.

To be fair, much of the week’s price drop was due to a 4% slump on Monday as traders reacted to a decision by producer alliance OPEC+ to ease output cuts between May and July, despite a less-than-rosy second quarter outlook. 

While crude prices had rebounded from Monday’s lows, their recovery was too feeble to make a difference, in the face of on-off-and-on-again problems in Europe.

“The crude demand outlook for Europe and emerging markets is still messy and until optimism returns, oil prices could remain heavy,” said Ed Moya, who heads U.S. markets research for online broker OANDA. “Oil is in for a choppy trade environment over the next couple of weeks.”

New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled down 28 cents, or 0.5%, at $59.32 per barrel. For the week, WTI fell 3.5%.

London-traded Brent, the global benchmark for crude, settled down 25 cents, or 0.4%, on Friday at $62.95.  For the week, Brent was down 3%.

Earlier this week, reporting on the Covid-19 pandemic showed the U.K. variant of the virus continuing to scorch parts of Europe — with Poland experiencing 60 times more cases than a year ago. 

India, the third-largest buyer of crude after China and the United States,  saw a record of more than 100,000 new daily infections at the weekend. 

Crude prices have also come under pressure after Iran opened talks with global powers in Vienna this week to find a way to end the two-year long U.S. sanctions on its oil imposed by the former Trump administration. 

The White House, now under President Joseph Biden, is agreeable to ending the sanctions, provided Tehran shows proof that its nuclear program isn’t capable of producing an atomic bomb. Iran is, however, demanding the sanctions be removed first before it makes such concessions. 

Despite the differences, the talks have made progress almost every day since they began on Tuesday, reports said.

Iran has said that it could return “within months” to its peak oil production of nearly 4 million barrels a day once the sanctions are lifted. Sources familiar with the country’s crude output currently estimated its production at around 2 million barrels daily. 

Analysts say the additional supply from Iran, whenever it comes, will lead to a reconfiguration of global oil supply that could be more bearish than bullish. 

Oil Down 3.5% on Week; Demand Concerns Offset Euro Vaccine Progress
 

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Comments (4)
Alan Rice
Alan Rice Apr 10, 2021 1:21PM ET
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Earth is in trouble Will YOU help Me save Her ?? (Start NOW ??)
Rafael Undurraga
Rafael Undurraga Apr 10, 2021 7:57AM ET
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Iran increasing the production, new variants with record infections, borders closed with the planes in ground, lockdown in main cities, etc...add to this the graphic chart Head and Shoulders, this week can hit US$50 easily...
Steve Lora
Steve Lora Apr 09, 2021 4:32PM ET
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We were energy independent under Trump
Barani Krishnan
Barani Krishnan Apr 09, 2021 4:32PM ET
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We were NEVER energy independent. It's an illusion -- or, rather, a mathematical deduction made from subtracting petroleum exports over a certain period versus imports that created a net surplus in our favor. That didn't mean we were "energy independent". The truth is we have always imported anywhere between 3.0 and 6.0 million barrels of crude each week, mostly from Saudi Arabia and rest of the Middle East. When we stop doing that -- and we probably never will, given that we need such "heavy oils" for diesel and jet fuel etc versus the light grades we produce for gasoline -- then we call ourselves energy independent.
Shane Weddle
Shane Weddle Apr 09, 2021 4:32PM ET
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Barani Krishnan if our exports exceed oir imports then its fairnto say we had the capability of energy independence. Now in a connected world with exchange rates etc. its not as simple as the slogan but the use semantics to declare false something that is demostrobly true by simply observing thst we produced enough energy to he self sufficent if needed is harly fair my friend.
Barani Krishnan
Barani Krishnan Apr 09, 2021 4:32PM ET
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I maintain that we did NOT achieve energy independence -- not when we continue importing between 12 and 20 million barrels of oil a month. And yes, it is a use of semantics that I do NOT approve -- regardless whether it's Bloomberg or the Wall Street Journal that's reporting it, or whether the Democrats or Republicans are in charge of things.
Casador Del Oso
Casador Del Oso Apr 09, 2021 2:29PM ET
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So Iranian oil is set to replace all the oil lost by US shutdown of oil fields. Smart move Joe.
AC TCHAKOUNTE
AC TCHAKOUNTE Apr 09, 2021 2:29PM ET
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I am with you on that.
AC TCHAKOUNTE
AC TCHAKOUNTE Apr 09, 2021 2:29PM ET
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I am with you on that.
Jo Riley
Jo Riley Apr 09, 2021 2:29PM ET
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Joe doesn't lift his arm unless others pull the string.  And yes, they are not interested in US oil producers.  Oil - a natural environmental ingredient - they think is toxic.  The Sun controlling Earth's weather? - no, no, no it MUST BE because of oil.  Millions of batteries destined for landfills leeching chemicals is their solution...
 
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