Oil prices steady as investors take stock of a challenging week

By Sharon Cho on 3/22/2021
Brent
Brent's price slide continues following the worst week for the commodity since October.

SINGAPORE (Bloomberg) --Brent oil gave up some gains posted at the end of the worst week since October as the dollar strengthened and as investors assessed the near-term demand outlook.

Futures in London lost 1% to slip below $64 a barrel as a rising dollar reduced the appeal of commodities priced in the U.S. currency. Demand is showing some signs of weakness with the number of unsold April-loading oil cargoes from West Africa swelling, while Germany is proposing an extension to lockdown restrictions. Despite posting a 2% gain on Friday, crude suffered a heavy weekly loss following a bearish start to last week.

Saudi Arabia, meanwhile, saw another assault on its energy facilities. While the offensive by Iran-backed Houthi rebels on an Aramco refinery on Friday had no impact on oil supplies, it’s the latest in a series of attacks on the kingdom.

Despite the weekly plunge, there’s confidence in the long-term outlook and a return to higher prices. Goldman Sachs Group Inc. said the recent sell-off was transient and that the rebalancing would continue with vaccinations driving higher mobility. The market will be keenly watching the OPEC+ meeting next week for any change to its output policy in May, especially after the slide in oil and comments from the International Energy Agency that supply is plentiful.

“Oil could continue swinging between red and green, being torn between demand fears and the die-hard optimists,” said Vandana Hari, founder of Vanda Insights in Singapore. Prices are “likely to hover around current levels, at least until OPEC+’s next move,” she added.

Prices:

  • Brent for May settlement fell 67 cents to $63.86 a barrel on the ICE Futures Europe exchange at 7:23 a.m. London time after slumping 6.8% last week.
  • West Texas Intermediate for April delivery, which expires Monday, lost 1.7% to $60.39 on the New York Mercantile Exchange after adding 2.4% in the previous session.
  • The more-active May contract slid 1.2% to $60.69.

The prompt timespread for Brent is still in a bullish backwardation -- where near-dated prices are more expensive than later-dated ones -- although the gap narrowed over the course of last week. The spread was at 16 cents a barrel on Monday, compared with 67 cents at the start of the month.

Iran’s Supreme Leader Ayatollah Ali Khamenei, meanwhile, said his country was in no hurry to revive the nuclear deal, although he reiterated that Tehran was still prepared to return to the original terms of the agreement once the U.S. has lifted sanctions. Despite the penalties, Iranian crude exports appear to be rising, with China boosting its purchases recently.

Other oil-marker news:

  • Saudi Aramco’s $75 billion dividend survived one of the biggest disruptions to oil markets in decades as the coronavirus pandemic and a price war sent crude prices tumbling.
  • A pick-up in U.S. spring break travel is pointing to the first signs of life for a battered jet fuel market, a trend that is likely to continue as more vaccinated Americans venture back onto airplanes this summer.

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