Oil prices began crashing on Thursday afternoon, falling nearly 9%.
WTI slid 8.68% to $58.99 per barrel by 4:04pm ET, while Brent had slipped 8.01% to $62.55 per barrel. It is the biggest drop in absolute terms since April 2020, when oil slipped into negative territory.
Analysts have been volleying predictions during the recent price rally, with bulls signaling there is more room to run, making proclamations of a coming supercycle. Others, more cautious in their outlooks, have warned for a couple of weeks that the optimism present in the oil markets were unjustified.
The recent rally was largely on the back of OPEC+ production cuts-or rather, the fact that they agreed to hold production steady in April, instead of ramping up production as the market had anticipated. The passing of the 3rd round of stimulus in the United States had also bolstered oil market sentiment.
But a rising dollar, increased crude inventories in the U.S., growing fears of a resurgence in coronavirus cases and vaccine safety concerns in Europe have proven worthy adversaries.
Those concerns are linked directly to oil demand resurgence. And markets are viewing this demand picture as less favorable today, as shown by crude futures which show the market backwardation is waning.
WTI's front-month contract is once again trading at a discount to the following month.
Crude oil WTI April contract is now trading at $59.46 per barrel, while the May contract is trading at $59.57. WTI's April contract is now down $5.14 on the day.
This is the fifth day in a row for oil price declines and the biggest drop in absolute terms since Apr 2020
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More
Comments
Oil is in a bull market underpinned by solid bullish factors which overwhelmingly outweigh any temporary bearish influences such as concern about a slowdown in the vaccination campaign in the European Union (EU) and its impact on the return of the global economy to normal business activities.
Oil prices will recover soon any losses incurred in the last five days and resume their surge. I still project Brent crude will hit $70-$80 a barrel in the third quarter of 2021 if not earlier, average $65 during 2021 with global oil demand returning to pre-pandemic level of 101 million barrels a day (mbd) by the middle of the year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Obviously natural gas has brought the near entirety of the US coal Industry to the brink of ruin.
Still...as with dirt cheap coal so too is dirt cheap oil especially at retail and after proper refining a very good thing for any economy but especially so for the US economy. One look at the importance of the US Airline Industry is to the US economy I think speaks for itself.