Oil’s harvest in April: Brent is up 8%.. West Texas is 10%
Oils harvest in April: Brent is up 8%.. West Texas is 10%: After recording its highest level in six weeks,
at the end of April, crude oil contracts ended their tradings supported by more than 2.3%,
as global crude oil prices jumped again this week after falling last week.
Good news coming from the United States and China caused black gold prices to increase.
In this report, Evest is following up on the development of oil performance during last week,
as well as an analysis of its performance during last April.
Oil’s weekly performance
Oil market recorded an upward momentum during last week, as April’s tradings ended in positive results,
despite concerns about demand for oil in India and the decrease in Japanese crude imports which caused oil prices to rise,
as the world prices turned to be declined at the session of the weekend on April 30.
West Texas Intermediate crude oil rose by 2.32% to record $ 63.58 a barrel,
while Brent crude oil rose by 1.72% to reach $ 67.25 a barrel.
In the week before the last one, both of them witnessed a decline by 1.57% and 1% in a row.
Since the beginning of this week, the tense movement of Covid-19 in India
– the world’s third-largest oil consumer
– has raised concerns about the country’s potential oil consumption.
On April 26
On April 26, at the first session of the week, world oil prices retreated,
when the Technical Committee of the Organisation of Petroleum Exporting Countries (OPEC) recognized
that oil demand could be affected by serious epidemics, referring to this South Asian country.
the market recovered
However, the market recovered during the next trading session when OPEC and its allies, also known as OPEC +,
decided not to change their plan to gradually increase crude oil production, while stating that demand would be recovered.
OPEC + assured that the world economy is continuing to recover thanks to unprecedented monetary and financial support and that the momentum
for recovery will be accelerated in the second half of the year.
The upward trend in oil prices continued to be maintained at April’s 28-29 sessions,
after the United States, Energy Information Administration reported that the country’s crude oil reserves rose by 90,000 barrels last week,
much less than the increase of 659,000 barrels, which was expected by analysts.
Petroleum products
Meanwhile, inventories of dripping Petroleum products declined by 3.3 million barrels,
while refineries increased their operations to 85.4% of their production capacity, which is the highest level since March 2020.
Until the last session of April, oil prices declined to close the week of erratic volatility. At the end of this session,
in New York, the price of June’s light crude oil fell by $ 1.43 (2.2%) to record $ 63 58 a barrel,
while in the London market, the price of Brent North Sea oil of the same period’s
delivery retreated by $ 1.31 (1.9%) to reach $ 67.25 a barrel.
This is the strongest daily decrease for both oils during the last 3 weeks. However, over the entire week,
the price of Brent oil continued to rise by 1.7%, while West Texas Intermediate crude oil rose by 2.3%.
The United States and China have the largest merit in prices support
The United States stated that in the first quarter of the year 2021, its economy grew by 6.4%.
This growth shows that the US economy has begun to recover after being stagnated by the Corona pandemic.
The United States is the world’s largest consumer of crude oil.
Therefore, when the economy shows high growth, demand for crude oil is likely to be increased.
US Central Bank
In fact, many economists, including the US Central Bank (Federal Reserve),
except that this year’s GDP for the country will be the best since 1984.
The policy-Making Committee of the Federal Reserve said: “Amid the progress of the vaccination program and strong policy support,
economic and labor indicators have shown a strengthening”.
Federal Reserve Bank
In its announcement, the Federal Reserve Bank decided to maintain the record interest rate at 0.25%,
and the bond purchase program (quantitative easing) worth $120 billion a month.
The Federal Reserve’s interest rate will be only raised in 2023 at least.
This policy is thought to keep the US economy growing rapidly,
which leads to providing a positive sense towards crude oil.
Good news
On the other hand, also the good news came from China, the world’s second-largest consumer of crude oil.
China’s data show that the manufacturing sector in April is still maintaining expansion with an index reading of 51.1.
Manufacturing activity is measured from the Purchasing Managers Index,
as figure 50 represents the boundary between expansion and contraction.
Above means expansion, whereas below means contraction.
When the Covid-19 pandemic attacked the world last year, China’s manufacturing sector only contracted once,
specifically during February 2020.
China’s continued industrial expansion is considered good news for crude oil, as it is also related to the demand for black gold.
Monthly performance in April
Brent crude oil jumped by 8%, while West Texas Intermediate crude rose by about 10% during April.
This is the fifth month in which oil prices had been rising in the half of last year as global demand
is expected to be returning to levels closer to pre-epidemic ones.
Increasing fuel consumption in the United States, China, and the United Kingdom
(roads fuel sales increased by the same amount as last summer)
made the market more optimistic, even as the epidemic spread in India, Brazil, and Japan.
according to analysts
However, according to analysts, the recovery in demand after Covid-19 has not been uniform and the number of cases in India continues to increase sharply,
reducing the increase of oil demand. It is too early for all forecasts of oil prices to rise to $ 70 a barrel.
Some analysis confirms that the price of $ 70 a barrel could be reached in the third quarter.