Oil Price Surge Still Bright Despite Friday Drawback
…….Friday Brent Crude price stands at $34
…….Thursday price was $36
……Surge expected as Lockdown Eases
By Jacob Sunday with Agency Reports
Brent oil price surge of $34 -$36 is still bright despite the drawback of Friday occassioned by development within the Chinese political consultative assembly,industry analysts have posited.
Oil prices had surged to the highest level since March on Thursday, supported by lower U.S. crude inventories, OPEC-led supply cuts and recovering demand as governments ease restrictions imposed on people’s movements due to the coronavirus crisis.
On Friday however oil prices dipped by more than 6 percent, after China’s top policy-setting meeting didn’t set an annual economic growth target because of “great uncertainty” of the recovery from the coronavirus.
As of 7:54 a.m. EDT WTI Crude was plunging by 5.66 percent at $32, and Brent Crude was down 4.74 percent on the day to $34.35.
China’s National People’s Congress (NPC), the most important policy-setting annual event in the Communist country, began on Friday and analysts were expecting to see the economic growth targets for 2020 and the stimulus to bolster the economy.
In case of stimulus for supporting infrastructure and railroads and other commodity-intensive sectors, analysts expected that government support could bolster China’s demand for crude oil, fuels, and other commodities.
By ditching the GDP growth target for this year because of high uncertainty, China roiled earlier market expectations and raised fears of slower-than-expected economic and oil demand recovery.
“The commodity market, in general, was looking for a bigger infrastructure pump from the NPC so there is bound to be an element of disappointment,” Stephen Innes, chief global market strategist at AxiCorp, said, as carried by Reuters.
In another developing story involving China, Beijing said that it plans to impose a new national security law for Hong Kong, which drew a reaction from U.S. President Donald Trump. President Trump said on Thursday that if China were to impose a new security law in the former British colony, the United States would “address that issue very strongly.”
The lack of Chinese GDP guidance and the renewed rhetoric between the U.S. and China were depressing global equity markets, the Dow futures, and oil prices early on Friday.
Despite the slump in prices early on Friday, oil was set to end a fourth consecutive week of weekly gains as global production cuts from OPEC+ and North America and slowly recovering oil demand with eased lockdowns give hope to investors and traders that the worst of the downturn may be behind us.
Crude prices have slumped in 2020, with Brent hitting a 21-year low below $16 a barrel in April as demand collapsed. With fuel use rising and more signs that the supply glut is being tackled, Brent has since more than doubled.
Brent rose 31 cents, or 0.87%, to settle at $36.06 per barrel, while West Texas Intermediate crude gained 43 cents, or 1.28%, to settle at $33.92 per barrel.
“Global supply has been curtailed to a great degree,” said Rystad Energy analyst Paola Rodriguez Masiu. “We are on a clear path to a gradual recovery now.”
In the latest sign the supply glut is easing, U.S. crude inventories fell 5 million barrels last week. Analysts had expected an increase.
“The rally in the crude futures is beginning to approach levels in which U.S. shale production declines will begin to slow and possibly reverse as low cost producers attempt to generate revenue,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.
At the same time, there is evidence of recovering fuel use.
Top U.S. airlines and Air Canada (AC.TO) on Tuesday reported slower ticket cancellations and an improvement in bookings on some routes, though executives said overall demand remained weak.
The Organization of the Petroleum Exporting Countries, Russia and other allies, known as OPEC+, agreed to cut supply by a record 9.7 million barrels per day from May 1.
So far in May, OPEC+ has cut oil exports by about 6 million bpd, according to companies that track the flows, suggesting a strong start in complying with the deal. OPEC says the market has responded well.