Oil extends steep weekly drop with demand outlook in question Oil extends steep weekly drop with demand outlook in question
Now Reading
Oil extends steep weekly drop with demand outlook in question

Oil extends steep weekly drop with demand outlook in question

West Texas Intermediate fell toward $77 a barrel after dropping the most since the banking crisis in March last week

Avatar
Oil

Oil kept falling in Asia — after losing almost 6 per cent last week — as the outlook for global demand remained in question and Asian fuel markets flashed warning signs on shrinking refining margins.

West Texas Intermediate fell toward $77 a barrel after dropping the most since the banking crisis in March last week.

Diesel and gasoline markets in Asia are slumping, leading some refiners to consider run cuts.

Still, China’s Golden Week holiday that starts this weekend could spur increased jet fuel consumption as travelers return to the skies.

“It’s unlikely that crude can bounce meaningfully absent crack expansion,” RBC Capital Markets analysts including Michael Tran and Helima Croft said in a note, referring to the margins refiners make from processing crude. Even so, there are signs margins could soon halt their declines as China reduces petroleum-product exports and if Asian refineries cut run rates, they said.

Crude has wiped out nearly all of the gains seen after the Organization of Petroleum Exporting Countries and its allies blindsided markets at the start of the month with plans for a supply reduction. Russian refineries, meanwhile, have slightly reduced oil-processing rates for this month due to maintenance season and output cuts pledged earlier.

The magnitude of the pullback in Asian refining margins took analysts at Citigroup by surprise, the bank said in a note. While the collapse was partly attributed to ramp up of new Middle Eastern refineries, all eyes are now on the strength of China’s fuel exports and whether the nation’s air travel rebounds strongly, Citi said.

Widely-watched timespreads are also signaling less bullishness on oil. The three-month spread for global benchmark Brent was 93 cents per barrel in backwardation, where near-term prices are higher than those further out, from $1.37 a barrel in backwardation a week ago.

The latest US figures on jobs, growth and inflation will be released later this week — some of the final marquee reports the Federal Reserve will have before its May policy meeting — offering clues on the demand outlook there. Some of the world’s biggest oil majors will also report results this week.

“Since there has been no significant demand side drivers since the OPEC+ supply cut, the rally seems to have subdued,” said Priyanka Sachdeva, an analyst at brokerage Phillip Nova Pte in Singapore. “Global economic concerns are evidently weighing on crude oil prices.”

Read: UAE, Kuwait non-oil trade grows 87% over decade

You might also like


© 2021 MOTIVATE MEDIA GROUP. ALL RIGHTS RESERVED.

Scroll To Top