Oil Prices Drop as Uncertainties Rise over COVID-19 Vaccines Efficacy

Oil Prices Drop as Uncertainties Rise over COVID-19 Vaccines Efficacy

Oil prices drop marginally as uncertainties rise over Covid-19 vaccines efficacy despite the Organisation of Petroleum Exporting Countries (OPEC) 6.5% oil demand recovery estimate.

On Friday, demand slow down dragged Oil prices as concerns mount over the speed of oil demand recovery amid confusing news about the effectiveness of COVID-19 vaccines.

There have been rising cases of fatal reactions to covid-19 vaccines in some countries prompting doubts about global demand recovery.

Specifically, the efficacy of the current vaccines escalated after health authorities in some European countries, including Denmark, Norway and Iceland, banned the COVID-19 vaccine developed by AstraZeneca and Oxford University amid reports of severe or fatal blood clots in vaccinated people.

Market data shows that international benchmark Brent crude was trading at $69.15 per barrel today after price dropped marginally by 0.69% after closing Thursday at $69.63 a barrel.

Also, American benchmark West Texas Intermediate (WTI) was at $65.51 per barrel at the same time following a 0.77% drop after it ended the previous session at $66.02 a barrel.

Recalled that oil prices skyrocketed after the Organisation of Petroleum Exporting Countries and allies (OPEC+) decided to keep the current production levels.

Also driving the price was tensions between Saudi Arabia and Yemen on Monday, which resulted in Brent briefly hitting over $71 a barrel.

On Wednesday, US Energy Information Administration (EIA) said the country’s gasoline stocks showed a significant drop, falling 11.9 million barrels, or 4.9% to 231.6 million barrels, which signals demand recovery before the start of the driving season.

However, the speed of actual demand recovery, based on vaccination rates and the degree to which travel and employment conditions return to pre-COVID levels are still uncertain.

In a monthly report released on Thursday by OPEC, the oil cartel forecasted better demand in the second half of the year.

Further declines were limited as US President Joe Biden finally signed the $1.9 trillion coronavirus relief bill into law.

The package will see most Americans receive $1,400 direct payments, expand the child tax credit up to $3,600, and boost funds for state and local government reeling from the coronavirus pandemic.

The American Rescue Plan, as the bill is formally known, will also increase food assistance programs through September and will help low-income households pay for rent.

Global oil demand to increase 6.5% in 2021m says OPEC

Global oil demand is expected to increase by around 6.5% to an average of 96.3 million barrels per day (bpd) in 2021, the Organization of Petroleum Exporting Countries (OPEC) said in its Monthly Oil Market Report on Thursday.

“Oil requirements in the first half of 2021 were adjusted lower mainly due to extended measures to control COVID-19 in parts of Europe and higher unemployment rates in the US,” the report said, clarifying that higher oil demand was expected in the second half of the year in line with expectations of solid economic recovery and the positive impact from vaccination rollouts.

Meanwhile, demand for OPEC crude in 2021 has been revised down by 200,000 bpd from the previous month to stand at 27.3 million bpd, which is 4.9 million bpd higher than in 2020.

OPEC crude oil production rises in February

Global oil production in February declined by 1.31 million bpd compared to the previous month to average 92.28 million bpd, while reflecting a year-on-year fall of 7.62 million bpd.

The report shows that OPEC crude oil production decreased by 650,000 bpd month-over-month to an average of 24.85 million bpd, while the share of OPEC crude out of total global production fell to 26.9% in February, marking a 0.3% decrease compared with the previous month.

Crude oil output increased mainly in Nigeria, Iraq, Iran, Venezuela and Libya, while production decreased primarily in Saudi Arabia and Angola.

Nigeria was the country among OPEC members that raised its monthly crude oil production the most in February with an increase of 161,000 bpd to reach 1.488 million bpd.

Iran, Venezuela and Libya are exempted from OPEC’s production cuts. However, these countries increased their outputs with Iran raising production by 35,000 bpd to reach 2.12 million bpd, Venezuela by 33,000 bpd to reach 521,000 bpd and Libya by 33,000 bpd to reach 1.18 million.

The production of de facto leader of the OPEC group, Saudi Arabia, fell by 930,000 bpd to 8.15 million bpd, mainly due to the country’s addition of around 1 million bpd to the OPEC+ production cuts.

Non-OPEC liquids production in February decreased by 670,000 bpd compared with the previous month to an average of 67.43 million bpd.

The preliminary production decreases in February mainly came from the US state of Texas where the extreme cold weather caused refinery shutdowns and losses of 600,000 bpd of oil.

Oil Prices Drop as Uncertainties Rise over COVID-19 Vaccines Efficacy