A lackluster performance for oil last week… Corona is still strongly affecting

A lackluster performance for oil last week… Corona is still strongly affecting

US West Texas Intermediate oil prices retreated last week, while Brent crude rose in a limited way as a result of a sudden rise
in cases of Coronavirus Covid-19 around the world and talk about the effectiveness of vaccination against the two new strains.

On Friday, oil prices closed lower after a relatively calm week in crude oil markets in addition to limited gains due to an ambiguous outlook for oil demand.

On Friday, West Texas Intermediate March delivery fell out of 14 cents or 0.3%, to trade at $ 52.20 a barrel.

At the same time, Brent Crude for delivery of March 2021 rose by 36 cents at a rate of 0.6% to record $ 55.88 a barrel.

During last week’s end, Brent crude ended 0.6% higher but in the last few days,
WTI closed down 0.3%to trade at $ 52.00 a barrel.

Markets sentiment fell after Johnson and Johnson announced its data on the effectiveness of the Covid-19 vaccine
as it said that its single-dose vaccine has proved to be 72% effective in preventing virus in the United States of America.

Evest has been following developments in this market during last week.

Kingdom of Saudi Arabia will decline its oil production starting from tomorrow

Saudi Arabia plans to decrease its production by 1 million barrels a day in February and March.

Compliance with production restrictions by OPEC+ also increased in January.

According to Reuters, OPEC oil production rose in January after it agreed to ease supply restrictions.

However, prices began to decline during the weekend and they were trading in a narrow range
as investors fear a more virulent outbreak of virus coinciding with a slowdown in the introduction of vaccines.

The oil market has strengthened by nearly 50% since October on the back of the vaccine launch but the emergence of new strains of Covid-19
in the United Kingdom and South Africa has raised concerns about economic weakness.

US economic stimulus package may not come soon enough to support the market.

US President Joe Biden urged Congress to take quick action regarding a $ 1.9 trillion Covid-19 aid proposal. He said: “There is no time for delay”.

A Reuters survey shows that oil is trading at current levels of the rest of world

A Reuters survey showed that oil prices are expected to hover around current levels
for most of 2021 before recovery gains its strength near the end of the year.

Reuters revealed the study, conducted on 50 experts which were published on Friday.

Participants felt that introducing several vaccines would help to end the epidemic gradually.

Experts expect an average of $ 54.47 for a price of a barrel of Brent crude in 2021.

These forecasts show optimism about price level compared to the survey conducted last month.

Experts had expected an average price for a barrel of Brent crude to reach $ 50.67 during last month.

However, the latter has recorded $ 54 since the start of this month.

Thus, 28 of 32 experts who participated in the December and January polls raised their expectations.

Analysts believe that vaccination campaigns could speed up economic activities in the second half of the year.

However, experts believe that this recovery will be slow.

A new OPEC meeting

Investors are waiting for the next meeting of the Organization of Petroleum Exporting Countries (OPEC)
which will determine its policy during the coming months which is supposed to be held on February 3.

OPEC and its allies have reduced the volume of their black gold production since last Spring to face a decline in demand and prices caused by the Covid-19 epidemic.

Production will also decline to 7.125 million barrels a day in February and to 7.05 million barrels a day during March.

This means that a decrease in demand due to restrictive measures is matched by an adequate drop in supply which prevents prices from rising or falling in a drastic way.

Experts expect that OPEC + to gradually increase production during April and May.

This increase in production will also depend on increasing in demand. However, OPEC + will keep the quota system in effect until the start of 2022.

The decline in demand for gasoline in United States

The latest report of the US Energy Administration released on Wednesday showed that US gasoline reserves increased by 2.5 million barrels.

This was double what analysts had expected.

Weekly demand for gasoline continues to decline.

This by its turn will lead to an increase in the US stocks amid strong restrictions on moving in several places.

In spite of all this, signs are positive

In general, oil is slowly recovering but strongly since the first vaccines against Covid-19 were announced in early November.

On January 13, Brent crude and WTI reached their highest standards at all through a period of eight and a half months to trade at $ 57.42 and $ 53.93 a barrel in a row.

Prices have slightly fallen since then, constrained by social distancing measures which are still in place all over the world.

Investors warned from slow vaccination campaigns.

Once vaccines are widely distributed, there is likely to be an increase in demand for oil.

At least month after month, recovery in oil demand will increase.

This will help in supporting prices

Coronavirus Covid-19 is still continuing to weigh on this market, as everyone is anxiously waiting for how vaccines will be able to change
the current situation especially restrictions imposed in several countries will be removed.

Air transportation will return to its previous state. This will give the oil a strong push.

Vacation operations are in full swing now, despite the slow of the process than that the plan which was put in place before offering.

So far, everything is moving in the right way.