06 April 2021

Crude Oil Tumbles on Higher Supply Concerns

Tags

News shaping
the markets today

     

What’s happening: Oil futures traded lower on Monday, settling with a loss of more than 4%.

What happened: Concerns around an increase in supply of oil from the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) group and higher output from Iran weighed on crude prices.

Traders are also worried about demand being impacted by renewed lockdowns in parts of Europe and a spike in covid-19 cases in some countries.

Why it matters: Crude prices had surged more than 3% on Thursday when the OPEC+ announced plans to boost production by 350,000 bpd (barrels per day) in May, 350,000 in June and 441,000 in July. Saudi Arabia will also gradually roll back its voluntary output cut of 1 million bpd.

Data from Baker Hughes late last week also pointed towards production gains ahead as the number of active US oil drilling rigs had risen by 13 to 337.

Fears of oversupply resulted in US crude adding 0.8% for the week, with Brent gaining 0.7%. Trading in crude oil futures was closed on Friday for the Good Friday holiday.

Investor sentiment was also hurt by a slow rollout of covid-19 vaccines in certain countries and lockdowns in various regions in Europe.

Markets shrugged off positive data from the US, which showed the economy adding the most jobs in seven months during March.

Instead, investors focused on a major spike in coronavirus cases in India and Brazil, which darkened the prospects of a faster rebound in the global economy and a subsequent increase in the demand for oil.

OPEC member Iran said it will be expanding its crude supply. Despite the sanctions, Iran has already increased exports to China. Traders are hoping for talks between the US and Iran for the potential revival of their 2015 nuclear deal. “If this were to happen, it also increases the possibility that we finally see U.S. sanctions against Iran lifted, allowing for further growth in Iranian oil exports,” analyst Warren Patterson of ING said in a note.

WTI (West Texas Intermediate) crude for May delivery lost as much as 4.6% to end trading at $58.65 per barrel on the NYMEX (New York Mercantile Exchange) on Monday. June Brent crude tumbled 4.2% to settle at $62.15 per barrel on ICE Futures Europe. With this, both crude benchmarks recorded their weakest settlements since March 25.

Among other energy commodities, May gasoline contract prices fell 3% to $1.96 a gallon on Monday, while May heating oil declined 3.2% to end at $1.77 a gallon.

What to watch: Investors await API (American Petroleum Institute) data on crude oil stockpiles in the US, which rose by 3.91 bbl/1mn in the week ended March 26.

The Markets Today

     

European stocks will be in focus today ahead of unemployment data from the region.

Context: Markets in Europe will reopen today after a long holiday weekend. European stocks had closed higher on Thursday.

Details: Investors in European stocks will be responding today to various economic data released recently, as markets remained closed on Friday and Monday.

Eurozone’s manufacturing activity climbed at its strongest pace on record in March, with the IHS Markit’s manufacturing PMI jumping to 62.5, from February’s reading of 57.9.

IHS Markit’s manufacturing PMI for Germany rose sharply to 66.6 in March. However, the country’s retail sales came in short of market estimates, plunging 9% year-over-year in February, versus expectations of a 6.3% decline.

European stocks will also respond to the spike in US markets on Monday, following the release of solid manufacturing data.

The pan-European Stoxx 600 closed the last session 0.6% higher, with tech stocks leading the rally and most sectors settling in positive zone.

London’s FTSE 100 rose 0.35%, while German DAX 30 ended the session with gains of 0.66%. The French 40 index climbed 0.59% on Thursday.

What to watch: Investors await unemployment data from the Eurozone. The unemployment rate in the region is expected to remain unchanged at 8.1% in February.

Rising covid-19 cases remain one of the top concerns for markets, with total global infections surging past 131.6 million.

Other Markets: US indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.13%, 1.44% and 2.02%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Spain’s unemployment change, foreign tourist arrivals and consumer confidence indicator, Italy's unemployment rate, UK’s new car registrations, Mexico’s consumer confidence and foreign exchange reserves, Brazil’s services PMI and composite PMI, Russia’s inflation rate and consumer confidence indicator, US Redbook index, job openings, IBD/TIPP economic optimism index and consumer inflation expectations as well as the IMF/World Bank spring meetings.

 

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.