October 27, 2021

The Queens County Citizen

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Crude oil is crushing as demand picks up again

Exxon gas station at night in Dallas, Texas, United States, April 27, 2016.

U.S. oil prices fell 7% on Tuesday to $ 36.76 a barrel. It was the worst day of the raw and the lowest closing price in almost three months. At one stage, the oil was reduced to 9%. World benchmark Brent crude fell below $ 40 a barrel for the first time since late June.

“Demand has fallen, supply has increased,” said Robert Yower, director of energy futures at Mizuho Securities. “The economic laws of survival are being violated at both ends of the spectrum.”

The sale comes after OPEC’s original leader, Saudi Arabia, cut its official selling price to Asia and the United States. Bloomberg News Reported. The world’s leading oil exporter will have to cut prices to attract buyers.

“It’s a double-flashing warning sign,” Yaver said. “OPEC is kind of panicking today by giving a bad signal to the energy community.”

‘Sudden sale orders’

The latest turmoil in the oil market has been a major upheaval in the stock market.

The Nasdaq fell Tuesday is the third day in a row that Tuesday is flirting with a 10% correction from record levels. Major pandemic winners Tesla (TSLA), Apple (AAPL) And Zoom in (ZM) There are very few.

“Oil gets caught up in risk-off trade,” said Jeff Will, an energy analyst at Newberger Berman. He said that “nothing has changed” in the basic supply / demand film for oil.

Just as investors are touching the exits on tech stocks, they are unleashing ula hajj bets on crude oil.

“Everyone is trying to get out at once. There is an avalanche of sales orders,” Mizuho’s Yaver said.

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Investors are also coming out of oil reserves.

Apache (WHAT), Occidental petroleum (OXY) And Diamondback Energy (Fang) All fell more than 6% on Tuesday. ExxonMobil (XOM), Which was last month Kicked out of the dough, Reduced by another 3%.

Weak air travel discourages demand

The pandemic, along with the price war between Russia and Saudi Arabia, has caused oil prices to rise this spring. U.S. oil prices turned negative for the first time, reaching $ 40 a barrel.

But unprecedented production cuts from OPEC and Russia have helped trigger a V-shaped recovery in the energy market. Seven weeks after the bottom, The U.S. crude returned to $ 40 a barrel. This led to the acceptance of OPEC and Russia Slowly increase production from very low levels.

The good news for oil bulls is that demand for gasoline has grown significantly.

Road traffic has almost recovered and Bank of America expects global oil demand to be positive for the year from road use in the next few months. This helped raise the national average gasoline price to $ 2.22 per gall, which rose to a low of 77 1.77 at the end of April.

The bad news is that air travel is nowhere near COVID pre-levels – and this is very depressing on demand for jet fuel. As CNN Business Recovery Tracker Demonstrations, on Monday, processed just 940,000 people through TSA security channels, down 59% from a year ago.
Business travel does not recover Until the coronavirus vaccine became widely available, United Airlines (UAL) Chairman Oscar Munoz recently told CNN Business.

That’s why Bank of America warned in a report late last week that it would take three years for global oil demand to “normalize”.

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“Global oil demand has really slowed down. All of the low hanging fruits from global oil recovery have already occurred,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets.

When is the raw bottom?

Tran warned that fundamentals in the oil market would “continue to weaken through the fall”.

So how low can the knot go?

Even as of Tuesday’s low, U.S. oil prices are still trading above $ 75 Negative prices hit on April 20th. But energy analysts do not expect that trip to be repeated less than zero.

Yavertes insists the crude will not be less than $ 30 a barrel, because at that point OPEC will come to the rescue again.

“I don’t think we’re going to go into the abyss again like in spring,” he said.