Anyone banking on more upside momentum for oil prices may be disappointed going forward, with a holding pattern now being determined by rising concerns over demand coupled with releases from strategic petroleum reserves.
Oil prices have fallen particularly sharply over the past week as traders worry that China’s oil demand will take a big hit from reinstated lockdowns.
Brent blend for June delivery fell USD 10.84/bbl w/w to settle at USD 102.32/bbl, while WTI for June delivery fell USD 9.07/bbl to USD 98.54/bbl. Values were more robust along the curve, with Brent for delivery five years out falling just USD 1.44/bbl w/w to USD 72.70/bbl.
The fall in prices gained pace on 25 April after testing of Beijing residents began following COVID cases being reported in the Chaoyang district of the city.
While volatility in the energy markets remains high, there are signs that it’s declining, with intra-day trading ranges also trending lower. Front-month Brent appears to be in the latter stages of its third wave since Russia’s invasion of Ukraine. The amplitude of the waves from low to high is declining; the first wave spanned USD 43 per barrel; the second USD 23/bbl, and the third USD 14/bbl. The dampening of the cycles is mirrored in smaller intra-day trading ranges; there were 14 days in March with an intra-day trading range of more than USD 8/bbl, but there has been just one so far in April.
And now, commodity analysts at Standard Chartered are warning that fundamental risks are skewed toward a market surplus, adding that traders should be cautious about short-term price rallies and should instead maintain long exposure in the middle and back of the price curve.
Demand Hit
According to StanChart, lockdowns are likely to dent China’s oil demand by 1.1mb/d in April. However, the decline is expected to only last a few months, with China’s demand growth expected to come in lower by only 78 thousand barrels (kb/d) by July.
However, the experts have cautioned that any extension of area-wide lockdowns would likely extend negative demand effects into Q3, increase the Q2 demand loss and take the annual demand growth forecast into negative territory.
Anyone banking on more upside momentum for oil prices may be disappointed going forward, with a holding pattern now being determined by rising concerns over demand coupled with releases from strategic petroleum reserves.
Oil prices have fallen particularly sharply over the past week as traders worry that China’s oil demand will take a big hit from reinstated lockdowns.
Brent blend for June delivery fell USD 10.84/bbl w/w to settle at USD 102.32/bbl, while WTI for June delivery fell USD 9.07/bbl to USD 98.54/bbl. Values were more robust along the curve, with Brent for delivery five years out falling just USD 1.44/bbl w/w to USD 72.70/bbl.
The fall in prices gained pace on 25 April after testing of Beijing residents began following COVID cases being reported in the Chaoyang district of the city.
While volatility in the energy markets remains high, there are signs that it’s declining, with intra-day trading ranges also trending lower. Front-month Brent appears to be in the latter stages of its third wave since Russia’s invasion of Ukraine. The amplitude of the waves from low to high is declining; the first wave spanned USD 43 per barrel; the second USD 23/bbl, and the third USD 14/bbl. The dampening of the cycles is mirrored in smaller intra-day trading ranges; there were 14 days in March with an intra-day trading range of more than USD 8/bbl, but there has been just one so far in April.
And now, commodity analysts at Standard Chartered are warning that fundamental risks are skewed toward a market surplus, adding that traders should be cautious about short-term price rallies and should instead maintain long exposure in the middle and back of the price curve.
Demand Hit
According to StanChart, lockdowns are likely to dent China’s oil demand by 1.1mb/d in April. However, the decline is expected to only last a few months, with China’s demand growth expected to come in lower by only 78 thousand barrels (kb/d) by July.
However, the experts have cautioned that any extension of area-wide lockdowns would likely extend negative demand effects into Q3, increase the Q2 demand loss and take the annual demand growth forecast into negative territory.