(S&P Global Platts) Crude oil futures settled 4% higher March 26, clawing back most of the prior session’s losses as the market eyed an extended disruption in the Suez Canal and the likelihood OPEC would hold back supply amid pandemic-weakened demand outlooks.
NYMEX May WTI settled $2.41 higher at $60.97/b, and ICE May Brent was up $2.62 to end the week at $64.57/b.
A slower-than-expected demand recovery in the first half of 2021 is likely to be offset by an extended runway for OPEC+ supply cuts, US investment bank Goldman Sachs said March 26.
“While the market remains in deficit, concerns are rising over a COVID-variant led infection wave,” Goldman Sachs analysts said in a note. “We continue to view the decline in prices as overshooting the shifts in oil fundamentals. In particular, we expect a slower ramp-up in OPEC+ production this spring to help offset both slower EM and EU demand recovery and higher Iranian exports, with global demand still set to increase sharply through the summer.”
NYMEX April RBOB settled up 4.64 cents at $1.9673/gal, and April ULSD climbed 6.22 cents to $1.8100/gal.
Despite the sharp end-of-week rally, crude futures were roughly flat from the week prior and settled more than 7% below their recent peak in mid-March.
Gasoline cracks moved lower amid prompt demand concerns. The ICE New York Harbor RBOB crack versus Brent fell to $18.16/b in afternoon trading, in from $18.67/b the session prior, and the Platts Northwest Europe Eurobob crack versus Brent dipped 25 cents to $9.05/b.
Crude found further support amid uncertainty around the reopening of the Suez Canal. The backlog of global shipping traffic caused by the grounding of the Ever Given on March 23 is now expected to take weeks to clear, market watchers said March 26.
“The combination of increasing supply expectations and renewed demand concerns have weighed on price action in recent days and weeks, but the Suez Canal disruption has also offered a competing upside catalyst,” TD Securities analysts said in a note. “These market dynamics have seen prices routinely whipsawed between key levels, with market microstructure exacerbating the speed of the moves and elevating volatility.”
As of midday March 26, there were at least 22 crude and 23 refined product tankers waiting to transit the canal, according to data from cFlow, Platts trade-flow software. Some ships have started to divert from their original trade routes and head the long way through the Cape of Good Hope rather than the Suez Canal.
Expectations of a tighter near-term supply picture in the eastern Atlantic Basin pushed the ICE WTI-Brent spread to a 10-day low of around minus $3.63/b.
The US dollar edged lower March 26, taking a break from a three-day rally that pushed it highs seen last November. The ICE US Dollar Index retreated to 92.77 in midday trading, in from a four-month-high 92.826 reached March 25.
