Oil futures ended sharply lower on Friday, prompting US prices to weigh their gains for the week as investors weighed in on the new COVID-19 outbreaks in China, which was a driver of demand as other major economies were slowed by the coronavirus. pandemic.
“The euphoria in the oil market is undeniably strong, but market indicators from Asia are mixed,” Michael Tran, an analyst at RBC Capital Markets, said in a note.
China, the global engine of oil demand growth, is grappling with new COVID outbreaks and lockdowns in several regions of the country have led to a decline in discretionary driving patterns, he said.
China says it is now treating more than 1,000 people for COVID-19 as the number of cases rises again in the north of the country. Shijiazhuang and the cities of Xingtai and Langfang have been virtually closed off, trapping more than 20 million people at their homes.
“China’s growing health crisis has led to a decline in oil as it is the world’s largest importer of energy,” David Madden, market analyst at CMC Markets UK, said in a market update. “The Beijing government has locked up 22 million people because of increasing COVID-19 cases [oil] demand fears are circulating. ”
The global number of confirmed cases of the coronavirus causing COVID-19 rose above 93 million on Friday, according to data collected by Johns Hopkins University, while the death toll rose to above 1.99 million. The US has the highest number of cases in the world with 23.3 million and the highest death toll at 388,705, or more than a quarter of the global total.
Against that backdrop, West Texas Intermediate crude for delivery in February CL.1,
CLG21,
fell $ 1.21, or 2.3%, to settle at $ 52.36 a barrel on the New York Mercantile Exchange.
Prices based on the front-month contract ended the week with a modest rise of 0.2%, their third in a row, after their highest level since February last year, according to Dow Jones Market Data on Thursday.
March Brent raw BRN00,
BRNH21,
the global benchmark lost $ 1.32 or 2.3% against $ 55.10 a barrel on ICE Futures Europe, down 1.6% weekly.
“Crude oil has seen a resilient run in the first few weeks of 2021,” said James Hatzigiannis, chief market strategist at Ploutus Capital Advisors. “However, it is now approaching seriously overbought levels.”
“
Oil prices “have risen too quickly, a correction is too late. All bullish developments are priced in. ”
“
This week, “we saw reports of a decline in crude oil surplus, an increase in refinery activity and an increase in gasoline demand, all bullish developments for crude oil,” he told MarketWatch, but oil prices are too fast. increased, a correction is overdue. All bullish developments are priced in. ”
Data from Baker Hughes BKR,
on Friday, however, revealed a rise in the number of oil rigs in the US for an eighth straight week, implying higher output.
Hatzigiannis pointed out that Chinese demand could decline as the country “strategically increased its reserves” in 2020, when oil prices were historically low.
Meanwhile, some forecasts indicate that US travel “won’t return until the third quarter of this year,” he said, adding that he expects oil demand to rise significantly sometime in late spring, when infections should be significantly reduced. begin to decline.
Demand should also see a “slight rise” in President-elect Joe Biden’s proposed $ 1.9 trillion stimulus package, he added.
For WTI, “$ 50 is a high psychological price point,” and it would take “major bearish development to bring crude oil down below that level,” Hatzigiannis said.
Given the “combination of the Saudis’ commitment to managing supplies and indications that we are starting to see light at the end of the tunnel when it comes to the infections, I think we will stay above $ 50 in the long run. “, he said.
Petroleum products traded on Nymex ended lower on Friday, along with oil. February petrol RBG21,
lost 1.6% to $ 1.5284 per gallon, with prices 0.9% lower than in the week, while fuel oil HOG21,
fell 1.6% to $ 1.5929 a gallon, up nearly 0.9% weekly.
February natural gas NGG21,
netted off at $ 2,737 per million British thermal units, up 2.7% for the session and 1.4% higher for the week ending.