The current pullback in oil prices below $80 Brent is mired in recession fears as credit conditions in the US and many other economies tighten, and uncertainty hangs over the pace of recovery in Chinese demand.
That’s what Rystad Energy senior analyst Louise Dickson said in an oil market update sent to Rigzone on Tuesday, noting that a “pullback” in prices below $80 has come from “a handful of times from November 2022”.
“The slowdown in the US economy to 1.1 percent annualized growth in the first quarter of 2023 compared to 2.6 percent in the previous quarter on an annualized basis is a potential harbinger, but not entirely confirmed, that higher borrowing costs and rising prices may slow economic growth,” Dickson said in the update.
“China aiming for a growth target of ‘around’ five percent of its GDP, in a series of continuing downward revisions, also casts doubt on how much of a spark China can provide for growth economy and oil prices,” Dickson added.
In the update, Dickson said the relationship between GDP growth and oil demand is “strongly correlated”, but noted that it has “decoupled slightly” following the Covid-19 pandemic.
Dickson also warned in the update that May will be a “noisy month for both macro data and fundamental seasonality.”
“May is generally a shoulder season that sees moderate demand, both from refineries in maintenance and from consumers waiting until the Northern Hemisphere summer to travel, so signs of weak demand now do not necessarily mean weak prices in the high-demand summer season.” Dickson said.
“May will also be the month when we better understand how much of the 1.1 million bpd of their voluntary cuts OPEC+ will deliver, as well as how much Russian crude and diesel continue to flood the market and fill inventories,” Dickson added.
On November 7, Brent closed at $97.92 per barrel. The price fell to a close of $76.1 per barrel on December 9, 2022, rose again to a close of $85.91 per barrel on December 30, 2022, fell to a close of from $78.57 a barrel on January 6, it rose again until the end. of $87.47 on January 26, fell to a close of $79.94 on February 3, rose again to a close of $86.61 per barrel on February 13, then fell to a close of $72.97 on March 17, before rising again to a close of $86.31. per barrel on April 14. On May 2, Brent closed at $75.32 per barrel.
According to one extraordinary market update by Rystad Energy Senior Vice President Jorge Leonsent to Rigzone last month, if delivered in full, the recently announced OPEC+ cuts would further tighten an already fundamentally tight oil market, drive Brent to $100 a barrel earlier than expected and they would raise the price to about $110 a barrel this summer.
As of April 26 at 12:37 p.m. CEST, there have been 764.47 million confirmed cases of Covid-19 worldwide, with 6.91 million deaths, according to the latest figures from the World Health Organization Health (WHO). A total of 13.34 billion doses of vaccines have been administered up to April 25, according to the latest WHO data.
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