Oil Slides Toward $61 With Near-Term Demand Concerns in Focus - Bloomberg

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Photographer: Jason Alden/Bloomberg

Oil declined in Asian trading on concerns about the near-term demand outlook amid the uneven recovery from the pandemic.

Futures in New York slipped 0.9% to trade near $61 a barrel after two days of gains. Coronavirus cases are climbing rapidly in India and threatening the economy’s recovery from a rare recession, while in Southeast Asia, demand has hit a plateau and is unlikely to reach pre-virus levels until the end of the year or later. Some European nations are extending or reimposing lockdowns, and in the U.S., New York City’s mayor urged a pause on reopening.

The prompt timespread for global benchmark Brent crude, meanwhile, is near the narrowest backwardation in about two months. The bullish structure is rapidly approaching a bearish contango, a signal of oversupply.

While oil’s sustained advance this year stalled recently, there is confidence in the longer-term outlook as Covid-19 vaccinations are rolled out worldwide and as the U.S. unleashes significant stimulus. OPEC+ members are continuing to put a floor under prices through a series of output cuts, with the group scheduled to meet next week to determine production policy for May.

“There is now no chance that OPEC+ adjusts its production cuts lower next week,” said Jeffrey Halley, an analyst at Oanda Asia Pacific “I had expected a pullback to cull the speculators, just not this deep. In the short-term, I am expecting oil to range with a bias to the downside.”

Prices
West Texas Intermediate for May delivery lost 55 cents to $61.01 a barrel on the New York Mercantile Exchange at 12:15 p.m. Singapore time. The April contract expired Monday after adding 0.2%. Brent for May settlement fell 0.8% to $64.09 on the ICE Futures Europe exchange after rising 9 cents in the previous session.

The prompt timespread for Brent was 7 cents a barrel in backwardation -- where near-dated contracts are more expensive than later-dated ones. That compares with 67 cents at the start of the month.

U.S. crude stockpiles, meanwhile, probably expanded by 1.2 million barrels last week, according to the median estimate in a Bloomberg survey. If confirmed by government data on Wednesday, it would be a fifth weekly increase, the longest run of gains since May. Inventories have ballooned after the cold snap last month shut several refineries, some of which are still attempting to restart. Industry figures are due later Tuesday.

Other oil-market news:

Saudi Arabia is seeking more help from the U.S. to defend its oil facilities, underscoring the kingdom’s concern about recent missile and drone strikes that it’s linked to arch-rival Iran. China released data that showed it imported no Iranian crude for the first time in months, a sign that oil from the U.S.-sanctioned nation may be masked as supplies from other countries. It hasn’t been this cheap for shale explorers to raise money on the high-yield bond market since oil was at $100 a barrel in 2014, so they’re jumping on the opportunity to refinance debt.

— With assistance by Jake Lloyd-Smith

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