Oil futures contracts ended sharply on Friday, prompting US prices to cut their week’s gain, with investors evaluating new outbreaks of COVID-19 in China, which has been a driver of demand while other major economies were slowed by the coronavirus pandemic.
“The euphoria of the oil market is unmistakably strong, but the Asian market indicators are mixed,” said Michael Tran, an analyst at RBC Capital Markets, in a note.
“China, the global engine of growth in demand for oil, is battling new outbreaks and blockages of COVID in various regions of the country that have led to a reduction in discretionary driving standards,” he said.
China says it is treating more than 1,000 people with COVID-19, as the number of cases increases again in the north. Shijiazhuang and the cities of Xingtai and Langfang are virtually blocked, confining more than 20 million people to their homes.
“The growing health crisis in China has led to a fall in oil, as it is the largest energy importer in the world,” said David Madden, market analyst at CMC Markets UK, in a market update. “The Beijing administration put 22 million people in block due to the increase in COVID-19 cases, so [oil] demand fears are in circulation ”.
The global count of confirmed cases of the coronavirus that causes COVID-19 rose to more than 93 million on Friday, according to data aggregated by Johns Hopkins University, while the death toll rose to more than 1.99 million. The USA has the highest case count in the world, with 23.3 million, and the highest number of deaths, with 388,705, or more than a quarter of the global total.
In this context, West Texas Intermediate oil for February delivery CL.1,
CLG21,
fell $ 1.21, or 2.3%, to close at $ 52.36 a barrel on the New York Mercantile Exchange.
Prices based on the previous month’s contract ended the week with a modest 0.2% gain, the third in a row, after settling on Thursday at its highest level since February last year, according to the Dow Jones Market Date.
Brent from March BRN00,
BRNH21,
the global benchmark lost $ 1.32, or 2.3%, to $ 55.10 a barrel on ICE Futures Europe, for a weekly drop of 1.6%.
“Oil had a resilient run in the first weeks of 2021,” said James Hatzigiannis, chief market strategist at Ploutus Capital Advisors. “However, it is now approaching overbought levels.”
“
Oil prices “have risen too fast, a correction is overdue. All discharge developments were assessed. ”
“
This week, “we saw reports of a reduction in the surplus of crude oil, an increase in refinery activity and an increase in gasoline demand, all optimistic developments for oil,” he told MarketWatch, but oil prices “rose very quickly, a correction is overdue. All bullish developments have been evaluated. ”
Data from Baker Hughes BKR,
on Friday, however, it revealed an increase in the count of U.S. oil rigs for the eighth consecutive week, implying greater production ahead.
Hatzigiannis pointed out that Chinese demand may fall because the country “strategically increased its reserves” in 2020, when oil prices were historically low.
In the meantime, some predictions indicate that trips to the United States “will not return until the third quarter of this year,” he said, adding that he expects to see a significant increase in demand for oil sometime in late spring, when infections begin to subside. decrease significantly.
Demand is also expected to have a “slight jump” from the $ 1.9 trillion stimulus package proposed by President-elect Joe Biden, he added.
For WTI, “$ 50 is a big psychological price level” and it would take “a big bearish development for oil to fall below that level,” said Hatzigiannis.
Given the “combination of Saudi Arabia’s commitment to managing supplies and indications that we are starting to see light at the end of the tunnel with respect to infections, I think we will be above $ 50 in the long run,” he said.
Oil products traded on Nymex ended lower along with oil on Friday. February gasoline RBG21,
lost 1.6% to $ 1.5284 a gallon, with prices down 0.9% for the week, while February heating oil HOG21,
fell 1.6% to $ 1.5929 a gallon, with a weekly increase of almost 0.9%.
February natural gas NGG21,
closed at $ 2.737 per million British thermal units, up 2.7% in the session and closing 1.4% up on the week.