WTI recovers to the mid-$61.00s as desks remain bullish on oil markets
- WTI has continued its intra-day recovery and is now trading in the mid-$61.00s.
- A number of institutions reiterated their bullish forecasts for crude oil, helping calm nerves following Thursday’s sharp sell-off.
Crude oil markets continue to nurse a recovery in wake of Thursday’s steep losses; front-month futures contract for West Texas Intermediary (WTI), the American benchmark for sweet light crude oil, currently trade at session highs in the mid-$61.00s, a decent intra-day recovery from lows close to the $59.00 level. WTI still has some way to go to recovery the losses incurred on Thursday, when it slipped all the way from the upper-$64.00s. On the day, it looks as though WTI is going to close the session with gains of about $1.50 or roughly 2.5%.
Driving the day
Cooler heads appear to be prevailing in crude oil markets this morning, helping the complex stabilise after Thursday’s steep losses. Indeed, helping the market stabilise has been reassuring comments from major investment banks who still favour higher crude oil prices over the coming months; Goldman Sachs are still calling for WTI to hit $80 in the summer and UBS predicting Brent will hit $75 in the second half of the year (Brent is trading at just under $64.00 this morning).
But the drivers of this week’s drop should not be discounted to readily and may continue to weigh on crude oil in the coming weeks, or at least slow any recovery rally. Firstly, the pandemic news in Europe continues to worsen as 1) the EU is engulfed in a third wave of the virus that is prompting more countries to tighten restrictions (France being the latest to announce new restrictions), 2) as the EU continues to bungle its vaccine rollout and, finally, 3) the much more efficient/rapid vaccine rollout in the UK looks to be facing some bumps in April, with less doses expected to be delivered than in March amid supply chain issues. The UK government is saying that the slower pace of vaccine deliveries in April does not affect the roadmap to reopening, but new lockdowns on the continent will certainly affect crude oil demand there.
Meanwhile, other crude oil bearish developments this week include a bearish weekly US crude oil inventory update (many desks see further inventory build ahead given the front-end of the crude oil futures curve having recently gone into contango) and lots of press attention on increasing Iranian crude oil exports to China; unofficial Chinese imports of Iranian crude hit above 300M tonnes per month in early 2021 and Indian refiners are adding Iran to their annual import plans amid expectations that the US will ease sanctions on the country’s exports.