Oil Still Under Pressure By Lower-Demand Risk

Oil prices decreased for the second trading session in a row on Monday 25 January, despite rising demand-side threats due to a rise in the occurrence of coronavirus cases in China and the possible implementation of a lockout in France. Moreover, an increase in crude oil stocks in the United States, which also appears to place pressure on oil prices, is worth remembering. The news about the rise of Iranian exports to record levels during the time of the embargo was another damaging moment for the balance in the ‘black gold’ economy.

March Brent crude futures were at $55.88, down 0.18 percent, while March WTI crude futures settled at $52.77 after trading down 0.26 percent.

The coronavirus pandemic is in the glare among market players once again. The rising number of cases in China, which is the largest oil importer in the world, is of special concern. Currently, the country has been quarantined for two weeks in two major cities, and the lockout was first enforced in Hong Kong on January 23.

It is also worth mentioning that the implementation of the third quarantine, which could be confirmed next Wednesday, is being debated in France. If the pandemic situation in the world continues to deteriorate, oil demand may suffer, placing pressure on the ‘black gold’ prices.

The release last Friday of figures from the EIA agency on oil supplies in the United States was another negative consideration for the oil sector. As a result, the country’s crude oil reserves rose by 4.351 million barrels at the end of the week ending January 15, relative to a decline of 3.247 million barrels a week ago, which was slightly worse than the consensus estimate of -1.167 million barrels. Around the same time, in the month under analysis, distillate stocks rose by 0.458 million barrels, compared to a rise of 4.786 million barrels a week ago, while analysts had expected an increase of 1.214 million barrels. Around the same time, stocks of gasoline declined by 0.26 million barrels, relative to the consensus estimate of +2.771 million barrels and the previous value of +4.395 million barrels.

Moreover, the reports about the rise of Iran’s oil exports continue to place pressure on oil prices. So, last Friday, Bijan Zanganeh, the country’s oil minister, said that Iran has recently managed to lift exports to record levels since the introduction of the embargo. At the same time, Iranians are preparing to raise production to 4.5 million barrels per day in 2021, of which 2.3 million barrels per day will be exported. The nation exported approximately 2.8 million barrels per day before the implementation of the embargo, and after the introduction of sanctions, this amount dropped to 0.3 million barrels per day.

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