But analysts are maintaining a positive demand outlook for later this year: File Image/Pixabay
The renewed lockdowns earlier this week in parts of Europe due to rising Covid infections yet again panicked crude traders, who in the previous session had been distracted by a large container ship blocking the Suez Canal; oil prices on Thursday correspondingly fell by 4 percent.
Bob Yawger, trader at Mizuho, said, "Germany, Italy, and other areas in the eurozone are going backwards and the demand destruction is basically overwhelming."
Prices were also pressured by producers facing difficulties selling to Asia, especially China, as Asian buyers opted instead for cheaper oil from storage; Chinese independent refiners have slowed imports because of maintenance, strong Brent prices, and a large influx of supplies, including oil from Iran.
Peter McNally, Third Bridge
There's pent up demand for travel.....that is still coming
Brent on Thursday fell $2.46, or 3.8 percent, to settle at $61.95 per barrel; West Texas Intermediate fell $2.62, or 4.3 percent, to settle at $58.56 per barrel.
But Paul Horsnell, head of commodities research at Standard Chartered, took a bird's eye view of the market by pointing out that "It all got a bit too excited earlier with talk about supercycles and massive stock draws in the first quarter....that was never on the cards; the big stock draws come later."
Peter McNally, global head for industrials, materials and energy at Third Bridge, agreed: "There's pent up demand for travel, whether it be air or road: that is still coming...but in the near-term there's a few hurdles we need to clear before we get to that point."
Indeed, although crude prices are on track for a third straight week of losses, the commodity is still up around 20 percent this year and there is confidence in the longer-term outlook for demand as Covid vaccinations accelerate worldwide and the Organization of the Petroleum Exporting Countries (OPEC) continues to restrict supply in order to compensate for a still-fragile demand recovery.
Meanwhile, all attempts so far to dislodge the container ship in the Suez Canal have failed, but it is said that the spring tide on Sunday or Monday could be the turning point for rescue efforts.
Whether or not that proves true, analysts point out that the longest ever accidental closure of the canal will have minimal impact on oil prices because, according to Julian Lee, oil strategist for Bloomberg, "the waterway just isn't what it once was for oil traffic."