Significantly lower prices can lead to a response from OPEC+ as well as discourage the reactivation of US well drilling and completions.įor oil prices, it looks like a bumpy road ahead as the world's economies reopen at varying pace.
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Higher prices at this point will probably trigger accelerated drilling and production from the US shale plus faster production increases from OPEC+, ensuring prices become progressively unstable above $70. The outlook for oil markets is clouded by uncertainty over the speed of the demand recovery. This is what happened with the Spanish flu pandemic in 1918 that lasted two years–despite the absence of a vaccine rollout. As the second wave is not showing signs of a peak, markets can see further downside to fuel demand over May.Īll in all, it looks like markets have to live with the pandemic for another year until it naturally dies down despite the speed of the vaccine rollout and its success. But with the elections over and the virus still spreading, there could be a deeper impact in May. Fuel sales in India could have been worse in April but for elections in some states that helped spur demand as thousands of people attended rallies and members of political parties used vehicles for campaigning. Indian refineries are diverting oxygen produced at their plants to hospitals to help battle a serious second wave, which has led to fuel sales tumbling during the first half of April compared with the previous month. Diesel demand saw just a 1.7 percent decline MoM to a total of 5.9mt over the month.
Preliminary data for Indian fuel demand shows that gasoline demand fell 6.3 percent month on month to 2.14mt, the lowest since August. India's COVID-19 crisis can slash an extra 5,75,000 Bpd of oil demand in April and 9,15,000 bpd in May 2021, disturbing the almost balanced global oil market and building a sizable glut. The new lockdown measures in India and Brazil are forcing many to revise their fuel demand forecasts. Oil investors are trying to ignore the catastrophic COVID spread in India which has logged more than 20 million infections. India matters, whether OPEC+ likes it or not Other parts of the world like India, Japan and Brazil are even further behind. In Europe and Canada, vaccination rates are roughly half that level. While the US and the UK have administered enough shots to protect more than one-third of their populations, they are in a very small group of countries to have reached that milestone. On vaccine optimism, unfortunately, not all national campaigns are equal. This can lead to a glut when markets are in dire need of a supply-demand balance. Russia’s production data for April shows that crude oil and condensate production averaged 10.46MMbbls/d, up from 10.26MMbbls/d the month before. Given that OPEC+ will start to gradually ease production cuts this month, along with Saudi Arabia, markets could see almost 530Mbbls/d of additional supply coming back over May. It will only step it up if the sanctions end, as China’s economy is growing again. There have been reports that China continued to buy Iranian oil despite the sanctions. The US, too, cannot let this opportunity slip away before a hardliner takes up the reins in Iran.
With the presidential elections in Iran just two months away, Iranians cannot afford to lose a moderate statesman in their hour of need. When Iranian oil reaches the market, there will be a measurable effect on the supply of the commodity. It can raise its exports to 2.5 million barrels a day once the sanctions are lifted. Iran sanction worries are back with a strong possibility of the country agreeing to a new nuclear deal and if that happens, it will waste no time in selling its most precious commodity, the crude oil, to revive its economy, battered by three-year US sanctions and the pandemic.
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Analysts believe the demand for crude oil will grow as the economy goes full steam.
Its economic growth is pretty impressive even though it was the epicentre of the outbreak in the initial days.
The country China appears to be containing the spread of the virus reasonably well with accelerated vaccine rollout. In China, meanwhile, there is no cause for concern. Unlocking opportunities in Metal and Mining.Life Insurance Made Simple Pharma Industry Conclave.
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