Oil prices steadied on Monday after a broad sell-off last week, as new European coronavirus lockdowns dimmed expectations of a quick economic recovery, but market players were broadly confident of a demand rebound later in the year.
“Oil (had) its worst week this year as concerns grow over a flaring up in COVID-19 cases across Europe,” Dutch bank ING said in a note. “This comes at a time when there are clear signs of weakness in the physical oil market.”
Nearly a third of French people entered a month-long lockdown on Saturday while Germany plans to extend its COVID-19 lockdown into a fifth month, according to a draft proposal.
“Vaccination campaigns haven’t been as fast as the market had hoped for and consequently this will have an effect on the oil demand recovery, which in turn hurts prices, cutting some growth potential,” said Louise Dickson, oil markets analyst at Rystad Energy.
While a broad economic recovery remains elusive, Saudi Aramco Chief Executive Amin Nasser remains optimistic on prospects for the world’s top oil exporter later in the year.
The Organization of the Petroleum Exporting Countries (OPEC)and its allies, together known as OPEC+, have put in place unprecedented production cuts in a pact to balance global markets after demand plunged during the COVID-19 pandemic.
U.S. drillers, meanwhile, are starting to take advantage of the recent spike in prices, adding the most rigs since January in the week ending last Friday.
Oil Rises on Drawdown in U.S. Oil Stocks, OPEC Demand Outlook
Oil prices rose in early trade on Wednesday, adding to overnight gains, after industry data showed U.S. oil inventories declined more than expected and OPEC raised its outlook for oil demand.
Brent crude futures rose 28 cents, or 0.4%, to $63.95 a barrel at 0057 GMT, after climbing 39 cents on Tuesday.
U.S. West Texas Intermediate (WTI) crude futures similarly climbed 28 cents, or 0.5%, to $60.46 a barrel, adding to Tuesday’s rise of 48 cents.
Oil price gains over the past week have been underpinned by signs of a strong economic recovery in China and the United States, but have been capped by concerns over stalled vaccine rollouts worldwide and soaring COVID-19 infections in India and Brazil.
Nevertheless, the Organization of the Petroleum Exporting Countries (OPEC) tweaked up its forecast on Tuesday for world oil demand growth this year, now expecting demand to rise by 5.95 million barrels per day (bpd) in 2021, up by 70,000 bpd from its forecast last month. It is banking on the pandemic to subside and travel curbs to be eased.
“It was a welcome prognosis by the market, which had been fretting about the impact the ongoing pandemic was having on demand,” ANZ Research analysts said in a note.
Further supporting the market on Wednesday, sources said data from the American Petroleum Institute showed crude stocks fell by 3.6 million barrels in the week ended April 9, compared with estimates for a decline of about 2.9 million barrels from analysts polled by Reuters.
Traders are waiting to see if official inventory data from the U.S. Energy Information Administration (EIA) on Wednesday matches that view.
Market gains are being capped on concerns about increased oil production in the United States and rising supply from Iran at a time when OPEC and its allies, together called OPEC+, are set to bring on more supply from May.
“They may have to contend with rising U.S. supply,” ANZ analysts said.
EIA said this week oil output from seven major shale formations is expected to rise by 13,000 bpd in May to 7.61 million bpd.
Oil Inches Higher But Rangebound as COVID-19 Cases Soar
Oil prices edged higher in rangebound trade on Monday on optimism about a rebound in the U.S. economy as vaccinations accelerate, but rising COVID-19 cases in other parts of the world kept a lid on prices.
The prices have remained rangebound in the last three weeks, with Brent between $60 and $65 per barrel and WTI at $57 to $62.
“Oil prices are entering a consolidation phase after swinging wildly last month,” Stephen Brennock of oil broker PVM.
“While there are still plenty of reasons to be bullish, market players have become more cautious as infections have surged in Europe, India and some emerging markets, while vaccine rollouts have proved slower than anticipated,” he added.
India now accounts for one in every six daily infections worldwide, and other parts of Asia are seeing infection rates rise.
Asian oil demand remained weak and some buyers asked for lower volumes in May partly because of refinery maintenance and higher prices.
The United States has fully vaccinated more than 70 million people but U.S. gasoline demand has not picked up as much as expected.
The U.S. economy is at an “inflection point” amid expectations that growth and hiring will accelerate in the months ahead, but faces the risk of reopening too quickly and sparking a resurgence in coronavirus cases, Federal Reserve Chair Jerome Powell said in an interview broadcast on Sunday.
“There really are risks out there. And the principal one just is that we will reopen too quickly, people will too quickly return to their old practices, and we’ll see another spike in cases,” Powell said in a CBS interview, recorded on Wednesday.
On the production side, no new oil drilling rigs were started in the United States in the most recent week, a report published by Baker Hughes showed.
U.S. Africa Energy Forum 2021 Launches: Promotes U.S. Role as Primary Investor in African Energy
The U.S. Africa Energy Forum 2021 – organized by Africa Oil & Power, in partnership with the African Energy Chamber’s U.S.-Africa Committee – will foster alignment between U.S. and African governments’ energy policies and highlight African oil, gas, power and renewable projects across the energy value chain for U.S. investors; the multi-day forum unites U.S. and African policymakers, energy executives and industry leaders to create new linkages and foster discussions that drive long-term policy formation and project execution; the in-person, two-day summit and gala dinner will be hosted in Houston, Texas (October 4-5, 2021) and an online seminar and in-person networking event will be held in Washington D.C. (July 12).
Africa Oil & Power (AOP) and the African Energy Chamber are excited to announce the launch of the first-ever U.S. Africa Energy Forum (USAEF). This event aims to create deeper cooperation between the U.S. and Africa on energy policy, to reach alignment on long term sustainability goals, to stimulate greater American investment in the African oil, gas and power sectors, and to engage and reposition the U.S. as the primary partner of choice for African energy developments.
Under the theme “New Horizons for U.S. Africa Energy Investment” the forum will explore diverse foreign investment and export opportunities across the continent, including natural gas as a vital fuel for the energy transition; energy storage and battery minerals; Africa’s place in global energy supply chains; the benefits of the African Continental Free Trade Area; evolving energy technologies and how they relate to the future role of petroleum resources; and on-and off-grid power developments.
An online seminar and in-person networking event will be held in Washington D.C. on July 12, 2021, building up to the in-person U.S. Africa Energy Forum summit and gala dinner, to be hosted in Houston, Texas, on October 4-5, 2021. Africa Oil & Power and the African Energy Chamber invite all U.S.-based companies with an interest in engaging with African industry leaders and project developers to participate in the USAEF Houston summit.
This initiative comes at an important juncture in U.S.-Africa relations. The Biden Administration’s announcements of its intentions to proactively build a stronger U.S.-Africa partnership coincides with the fact that African projects are seeing rising interest from U.S. companies and lending institutions alike. The USAEF event is thus dedicated to enabling dialogue between its participants that advances these developments.
“Our mission has always been to showcase the resource potential that Africa has to offer while at the same time showing its growing preference for sustainable energy policies and technologies. Toward that end, we hope it becomes evident that Africa does not just want investment capital: it wants smart capital and an accompanying partnership with the investors,” says James Chester, Senior Director of Africa Oil & Power. “The U.S. Africa Energy Forum represents the first-of-its-kind opportunity to catalyze U.S. participation in Africa’s energy transformation – via technology, policy support, capital injection and skills development – and turns a new page in the chapter on global energy investment.”
In partnership with the African Energy Chamber’s U.S.-Africa Committee, AOP will introduce American companies to African opportunities and advance an agenda of sustainable, long-term investment in African energy and other sectors by U.S. organizations.
“The rise in support from the U.S. to the continent is a credit to Africa itself, which is increasingly viewed as a favored destination for global investors, multilaterals and export credit agencies,” says Jude Kearney, President of Kearney Africa and former Deputy Assistant Secretary for Service Industries and Finance at the U.S. Department of Commerce during the Clinton Administration. “Africa continues to command a healthy share of global FDI in oil and gas industries. It has for decades shown that investment in those sectors is favorable compared to other jurisdictions and can be successful by many measures. Even as Africa and the rest of the world wrestles with a global pandemic, Africa’s energy sector shows vitality and resiliency – not only in hydrocarbons but in regard to new opportunities in mining, liquefied natural gas, and agriculture.”
Both African governments and private sector sponsors of African energy projects value highly the combination of investment and partnership that US investors famously convey. The USAEF seeks to enable successful partnerships between its participants such that the energy development goals of U.S. investors and strategic partners and their African counterparts can be achieved.
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