© Reuters.
By Barani Krishnan
Investing.com – Oil is struggling to recover its sharp rise in the past four months, with new Covid-19 blockades in Europe weighing on oil prices that are trying to recover from the worst week since the end of October.
The New York market, the benchmark for U.S. oil, fluctuated between red and green territory throughout the day before settling for just 15 cents, or 0.2%, at $ 61.55 a barrel. Although this advanced the 2.4% gain of WTI on Friday, it barely moved the needle into a market desperate for a boost of sentiment after last week’s 6.4% net drop.
The values traded in London, the global benchmark for oil, hit a mere 9 cents, or 0.1%, at $ 64.53. Like WTI, Brent also rose on Friday, gaining 2%, while closing the week down 6.8%.
Last week’s drop was the first significant drop for the oil markets, after a nearly five-month recovery, with few stops that added nearly 90% to prices.
On Monday, oil prices barely managed to break new ground after a meeting chaired by German Chancellor Angela Merkel decided to tighten Covid-19 restrictions, backing down on a recent easing as the infection rate in the biggest economy Europe has risen to more than 100 per 100,000 inhabitants.
According to a draft government plan discussed at the meeting, the blockades would be extended until April 18, varying in intensity according to the region and impact.
Covid-19 infections in neighboring Poland are also more than three times higher than those in Germany, while Italy – the main European hotspot for the virus during last year’s outbreak – was preparing for a national blockade during the end of Easter week from April 3 to 5.
Fawad Razaqzada, an analyst at London’s ThinkMarkets, said oil recovered from an unprecedented low base – particularly from the negative WTI price point of less than $ 40 a barrel last year – and historically high OPEC cuts, supported by optimism now about economic reopening in Covid-19 vaccines and the promise of longer trips that could stimulate pre-pandemic fuel demand.
However, oil prices may continue to struggle, as US supply may grow faster than demand, he said.
“Altogether, I can’t see oil prices going up significantly further. I think Brent will have a hard time staying above $ 70 and I estimate that WTI will average $ 60 per barrel in 2021, ”he said.
“The downward momentum may have already started after last week’s liquidation. While I think demand will improve even further as more economies reduce travel restrictions in the coming months, the impact of this will be offset to some extent by an increase in the oil supply. OPEC + will ease supply restrictions slowly, while U.S. shale production is likely to increase due to attractive oil prices again. ”
Before last week’s fall, oil prices rose virtually in one direction – upwards – with OPEC + production cuts, the promise of an economic reopening of Covid-19 closings and a successful US pandemic relief that was In progress. From just under $ 36 per barrel on October 30, WTI rose to just under $ 68 on March 8. Brent went from under $ 38 to just over $ 71 in the same period.
But practically forgotten at that time was the anemic demand for fuel for airplanes and other means of transport, as global travel continued to be severely restricted by the pandemic. Europe’s constant struggle with new outbreaks of infections; its alarmingly slow rate of vaccinations; and new blockages in the block were also treated with little seriousness.
On Thursday, however, those concerns peaked, exacerbated by 13-month highs in bond yields compared to and the peak to close to 92. WTI fell to $ 58.20, while Brent fell to $ 61.45, both a minimum of five weeks.
Data on Friday also showed that US drills were also starting to take advantage of an earlier spike in prices with optimism about the return on demand, adding the largest number of oil drilling rigs from January week through Friday -market.
The, an early indicator of future production, rose nine to 318 last week, the highest since April, energy services company Baker Hughes Co said in its closely-monitored report.
The platform count has increased in the past seven months and almost 70% from a record low of 244 in August.