Size of the text
This week, oil prices have dropped.
Getty Images/AFP/Apu Gomes
Oil prices have flipped this week after climbing consistently for weeks, plunging significantly on Thursday and continuing to decrease on Friday. The reversal could jeopardize one of the year’s most popular trades: a bullish bet on oil and related stocks. Vaccines against Covid-19 have proven to be effective, but their distribution has been uneven over the world, and new strains have resulted in mobility restrictions in some areas. The oil boom was built on the promise of a grand reopening of the global economy, but that may not be the case.
The decline, according to Bjornar Tonhaugen, head of oil markets at Rystad Energy, reduces “the excess froth that oil’s valuation has accumulated.” The price has been supported by OPEC’s supply curbs, but the recovery in oil demand remains shaky. “Vaccine skepticism persists, numerous European nations are extending or re-imposing lockdowns, and vaccine distribution is not as quick or seamless as the world had hoped,” he wrote.
Subscribe to our newsletter Review & Sneak Peek Every weekday evening, we summarize the day’s most important market news and explain what’s likely to matter the next day.
A fresh wave of Covid-19 cases has emerged in Europe, prompting France to put further restrictions on travel outside the country. As the number of cases rises, Germany may be obliged to postpone its reopening as well. Brent crude prices fell 1.1 percent to $62.56 a barrel on Friday. The US benchmark, West Texas Intermediate crude futures, lost 0.9 percent to $59.45, putting them on track for their sixth straight loss. On Thursday, WTI fell 7.1 percent, the biggest decrease since oil futures turned negative for the first time on April 20, 2020. WTI crude futures fell below $60 for the first time on March 2, closing at $59.75. Oil stocks were also on the decline.
Exxon Mobil is a multinational oil and gas corporation.
This week, (XOM) has lost 9% of its value. Smaller oil firms have suffered much larger losses, with
Laredo Petroleum is located in Laredo, Texas.
(LPI) has dropped by 21%. Analysts predict that around current levels, buyers will become more interested in oil. On Thursday, OANDA analyst Edward Moya wrote, “Significant decline from here looks unlikely because the short-term impact to demand forecast should be limited and OPEC+ output could hold constant for another month.” Avi Salzman may be reached at avi.salzman@barrons.com.
Continue reading
