Friday, 12 February 2021 08:09

Supply exceeds demand

Oil prices continued to decline on Thursday, limiting recent growth, as new lockdowns and the emergence of new coronavirus strains clouded prospects for sooner recovery in demand.

U.S. crude reserves fell by 6.6 million barrels (to 469 million barrels) in the week which ended February 5, the Energy Information Administration (EIA) said on Wednesday.

Brent crude futures went down by 0.62% and totaled $61.09 per barrel by 13:51 Moscow time on Thursday, while WTI futures were down 0.58% at $58.34 a barrel.

The price of Brent crude oil rose the previous nine sessions, which is the longest period of growth since January 2019.

The supply of oil on the world market is still outstripping demand due to the lockdowns caused by the pandemic and the spread of new COVID-19 strains, the International Energy Agency (IEA) said on Thursday.

"Given expectations of strong demand growth and a modest increase in supply from non-OPEC countries, a rapid reduction of reserves in the second half of the year is forecast," the IEA said in its monthly report.

The world's largest oil exporter, Saudi Arabia, is unilaterally cutting supplies in February and March, complementing cuts agreed by other members of the Organization of the Petroleum Exporting Countries (OPEC) as well as OPEC+.

According to Ian Stevenson, oil market editor at S&P Global Platts, the fundamental factors of the spot market deteriorated significantly in February, as the monthly supply plan increased by another four tanker positions. At the same time, a significant part of the already announced lots still cannot find a buyer. In anticipation of arbitrage deliveries from China, the competition for a buyer in the European market is only getting worse, Stevenson said.

"As a result, the differentials of oil grades to the standard are moving on a downward trajectory, despite the macroeconomic factors that push the quotes up," Stevenson explained.

 

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