Crude Oil Prices Plunge over Demand Uncertainty

Crude Oil Prices Plunge over Demand Uncertainty

Crude oil prices adjusted downward Thursday morning as demand concern resurface following report that the United States of America fuel stocks increased significantly.

As result of expected low demand, and the fact that supply outlook appears to be on the upside created uncertainties which affected oil prices movement.

Uncertainty over demand comes off the heel of supply increase following the Organisation of Petroleum Exporting Countries and allies (OPEC+) decision to raise production, albeit on incremental basis.

Ordinarily, oil prices are expected to react negatively to extra production capacity in the market couple with Iran factor that is on the ground.  

International benchmark Brent crude was trading at $62.67 per barrel Thursday morning, dropped 0.77% after closing Wednesday at $63.16 a barrel.

Also, American benchmark West Texas Intermediate (WTI) was at $59.26 per barrel at the same time, falling a 0.85% after it ended the previous session at $59.77 a barrel.

Oil prices came under pressure after the US Energy Information Administration (EIA) announced Wednesday that the country’s gasoline inventories rose by 4 million barrels, or 1.8%, during the week ending April 2.

The report however indicated that crude oil inventories, however, decreased by 3.5 million barrels, or 0.7%, for the same period.

Signaling low demand, the unexpected build in gasoline inventories came after major oil producers of OPEC+ decided to increase their output after April.

The group’s production will increase by 2.1 million barrels per day (bpd) until the end of July, easing the current production cut of 7.9 million bpd.

Not included in OPEC+’s production cut deal,  Market analysts said Iran may start production if intensified diplomatic efforts to return the US to the landmark nuclear accord end with a positive resolution. This would lift the Trump-era sanctions on Iran.

Senior officials of Iran, France, the UK, Germany, Russia, China, and the EU are meeting in Vienna for ongoing negotiations.

A US delegation was also in the Austrian capital on Tuesday in a bid to save the accord, but the team headed by Special Envoy Robert Malley did not participate in the meeting with other world powers, as Iran refuses to directly negotiate with the US until so-called “maximum pressure” sanctions are lifted.

The EIA’s positive projection in its April Short-Term Energy Outlook on Tuesday limited further oil price declines.

The agency revised up its forecast for global crude oil prices from $60.67 a barrel to $62.28 per barrel for 2021 due to “somewhat tighter markets in the second quarter.”

Aramco in talks to sell over $10B oil pipeline stake

In a related development, Saudi Arabia’s oil giant, Saudi Aramco, is in advanced talks to sell up to a 49% stake of its oil pipelines to a consortium for between $10 billion and $15 billion, according to those familiar with the matter, the Wall Street Journal reported on Tuesday.

The deal to transfer a minority stake to a group that includes US, Chinese and local investors is expected to be announced as soon as this week.

Saudi Aramco, which has assured it remains in operational control of the assets by holding a majority stake in the pipeline business, is in talks to sell the minority stake to a group of investors that could include US buyout giant Apollo Global Management Inc., energy investment firm EIG Global Energy Partners, Chinese infrastructure fund Silk Road Fund, and China Reform Fund Management Co., along with Saudi pension fund companies.

Should the parties agree, a joint venture will be set up, which will receive proceeds from Aramco for oil transit through the pipelines. However, at the time of this publication, further details of the revenue-sharing agreement have not yet been released.

Oil Prices Jump as U.S Energy Agency Revises Forecast

Crude Oil Prices Plunge over Demand Uncertainty