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Hello and goodbye $70
Brent tops $70 before prices crater as COVID-19 woes batter India region Steve Sutherlin Petroleum News
Brent crude briefly broke the closely watched $70 per barrel mark in May 18 trading, before sliding to $67.42 for a loss of 75 cents on the day. Alaska North Slope crude slid 78 cents to close at $67.42 and West Texas Intermediate lost 78 cents to close at $65.49.
If Brent could hold above $70 for a sustained period, it would be a feat it has not attained since 2019.
Oil’s rally flamed out as the BBC Persian news channel reported significant progress in ongoing talks to broker an agreement between Iran and the U.S. on a revival of the Iran nuclear deal, which would allow Iran to add supply to the market. Analysts estimate that Iran could bring as much as 2 million barrels per day of new production to the market if sanctions were lifted, and it has millions of barrels in storage waiting to be sold.
Prices continued sharply downward May 19, to the lowest levels in three weeks. ANS fell $1.97 to close at $65.45, Brent dropped $2.05 to $66.66, and WTI shed $2.13 to close at $63.36.
Analysts attributed the drop primarily to jitters over surging COVID-19 cases in Asia, as well as inflation concerns on the United States.
India’s pandemic woes have led to repercussions for its neighbors in the South Asian region.
Nepal and Bangladesh are scrambling in the face of rising infections to secure alternate sources of COVID-19 vaccines, as India withholds promised supplies due to its own worsening coronavirus situation. According to a May 18 Reuters report, India is unlikely to resume major exports of COVID-19 vaccines until October at the earliest.
Trading began the week on a more optimistic note May 17, with the benchmarks closing at levels not seen since April 2019. ANS rose 84 cents to close at $68.20, WTI gained 90 cents to close at $66.27 and Brent lifted 75 cents to close at $69.46.
Traders were bullish on oil as the United States, China and parts of Europe show signs of bouncing back from the pandemic as vaccinations increase, offsetting concerns about India.
U.S. passenger counts at TSA checkpoints hit the highest level since the pandemic began, driving optimism for a jet fuel demand rebound. On May 16, passenger levels exceeded 1.8 million, versus 253,807 on the same day in 2020 and 2.6 million on the same day in 2019.
The previous week ended with gains, as the dollar weakened against other currencies.
ANS gained $1.50 May 14 to close at $67.35, WTI gained $1.55 to close at $65.37 and Brent added $1.66 to close at $68.71.
India COVID-19 worries The pandemic-related dip in India’s oil consumption is likely to be more than offset by improvements in demand in China and the United States.
The U.S. Energy Information Administration revised down its second-quarter 2021 forecast for India’s consumption of petroleum and other liquid fuels by 0.3 million bpd, or 6% from April because of a significant increase in COVID-19 cases in the country.
At the same time, however, the EIA revised its total world consumption up slightly because of upward revisions to consumption in both China and the United States, which more than offset the downward revision in India, it said.
Reduced travel is expected to continue affecting petroleum consumption through May and June, the EIA said, adding that it expects India’s petroleum and other liquids consumption to return to previously forecast levels by July, but the forecast is uncertain and depends on the current duration of the COVID-19 outbreak and associated travel restrictions.
India is the world’s third-largest consumer of petroleum and other liquid fuels after the United States and China.
India’s Ministry of Petroleum & Natural Gas data indicate that petroleum consumption returned to pre-pandemic levels by Q4 2020, a trend that continued through Q1 2021.
India’s combined gasoline and diesel consumption was 2.4 million bpd in Q1 2021, the same as Q1 2019 and higher than Q1 2020, the IEA said. Gasoline and diesel consumption declined in April 2021 to 2.3 million bpd.
The EIA said oil demand in India presents a downside risk to its forecast because the effect of increased COVID-19 cases on oil demand provides considerable uncertainty, adding that India relies heavily on imports, so its declining consumption will significantly affect its trading partners.
“Future COVID-19 case counts and their ultimate effects on mobility and transportation fuel in India are highly uncertain,” the EIA said. “We will continue to adjust our outlook for India’s oil consumption in the coming months as official data are released and the responses to COVID-19 become clearer.”
Video games trump oil Recent Saudi investment moves may or may not portend the future of oil prices.
The Public Investment Fund, Saudi Arabia’s sovereign wealth fund, unloaded its 51 million share stake in Canada oil producer Suncor Energy, worth $1.2 billion, according to filings with the SEC.
The fund built its position in Suncor in 2020 after oil prices crashed, bringing share prices of oil and gas companies down, according to a Bloomberg News report.
The fund instead doubled its total commitment to video-game makers including Activision Blizzard Inc., Electronic Arts Inc. and Take-Two Interactive Software Inc. to $6 billion during the first quarter, according to filings.
The $400 billion PIF is funded by a mixture of borrowing, cash and asset transfers from the government and retained earnings from its investments, Bloomberg said. The fund plans to grow its assets to over 4 trillion riyals, or $1.1 trillion, by 2025.
It is chaired by Crown Prince Mohammed bin Salman. and managed by Governor Yasir Al Rumayyan.
Prince Mohammed is a fan of video games, particularly “Call of Duty,” Activision’s best-selling franchise. He told Bloomberg Businessweek in 2016 that he was part of the first Saudi generation to grow up with the gaming technology.
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