Oil Mixed On Good Economic News And Enduring Covid Fears

by Ship & Bunker News Team
Wednesday April 7, 2021

Oil prices on Wednesday were mixed, with one benchmark achieving modest gains based on improving global economic forecasts and U.S. crude declining due to fears that new Covid outbreaks will impact demand recovery.

Brent climbed 44 cents to $63.18 per barrel by 1:42 p.m. EDT (1742 GMT), while West Texas Intermediate fell 40 cents to $59.73.

Traders boosted Brent after the International Monetary Fund said public spending to fight Covid would push global growth to 6 percent this year, a rate not achieved since the 1970s; but WTI declined when news broke of rising infection rates in some states, coupled with gasoline inventories jumping 4 million barrels, according to the Energy Information Administration.

While many analysts think the biggest imminent threat to the crude market is a possible surge of exports from Iran if talks between the Islamic republic and the U.S. prove fruitful, Goldman Sachs thinks such a recovery won't come as an "exogenous" shock to the oil market and full recovery won't occur until summer 2022.

It added that a normalization in Iranian exports before the end of 2021 would reduce its year-end 2021 and 2022 Brent forecast of $75 per barrel by $5, while the lack of an agreement in 2022 would create more than $10 upside risk.

For his part, Albert Wolf, an associate fellow at the Johns Hopkins School of Advanced International Studies, told media the worry over Iran's economy may be misplaced: "There hadn't even been any formal or informal talks between the U.S. and Iranian sides, so it looks as if at present time, these talks are going to be a bust."

Meanwhile, despite the worries over the third Covid wave that is generating headlines and the rise in U.S. gasoline stockpiles, the EIA also reported that the four-week average for gasoline supplied in the U.S.–a proxy for consumption–ticked up to the highest since September; the gauge has increased for each of the past six weeks.

Brian Kessens, a portfolio manager at Tortoise, provided a much-needed broader perspective with regards to the pandemic and the fight back to normality: "The U.S. has been making really good Covid progress, while challenges remain in Europe surrounding the vaccine roll out and the spike in cases.

"If there's a silver lining, Europe from a lockdown perspective is likely being more aggressive now so that the summer does look that much brighter."