“This magnitude of deficit is in fact on its own sufficient to absorb the current perceived headwinds to the oil bull thesis, with lower prices in fact reducing the odds of a strategic release,” they said in a note. High-frequency inventory data points to a supply-demand imbalance of around 2 million barrels a day over the last four weeks, with OECD crude and Atlantic basin at seven-year lows. Potential weakness in China’s economy has also contributed to the bearish factors.ĭespite the renewed demand fears, Friday’s sell off may have been overdone, according to Goldman analysts including Damien Courvalin and Callum Bruce. President Joe Biden tried and failed to get the OPEC+ group to deliver more crude and then pivoted to a possible release from America’s Strategic Petroleum Reserve. “It’s a potent one-two punch for the petroleum complex, when there is a looming supply burst combined with a hit to demand from the virus,” said John Kilduff, founding partner at Again Capital LLC.Īfter rising to the highest in seven years, oil has faltered over the past month even as the Organization of Petroleum Exporting Countries and its allies stuck with a cautious approach to restoring output. has repeatedly said the option to tap its Strategic Petroleum Reserves remains on the table. The latter said Thursday it was working on one, while the U.S. The concerns come as the oil market fixates on the prospect of releases from strategic crude reserves by the U.S. Austria imposed a lockdown while Germany introduced some restrictions. The wave of infections in Europe is growing, once again raising the prospect of mobility restrictions that would hit oil demand. West Texas Intermediate for January delivery tumbled 3.2 per cent, while the expiring December contract lost 3.7 per cent. Oil logged its biggest weekly drop since August as Europe’s worsening COVID-19 crisis renewed the prospect of lockdowns just as key consuming nations look to add emergency supply to the market.
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