Fresh Highs As US Economic Data Fuels The Fire

Altogether, the data shows the economy is rolling down the runway for substantial lift-off in Q2. And make no mistake, the flightpath continues to extend thanks to the US vaccine rollouts.

Oil Markets

Oil prices contiued to slide overnight as third and fourth wave virus outbreaks in Europe and parts of Asia, notably India, have elevated lockdown concerns that continue to hit both spot and forward demand outlooks. And at this stage of the oil market recovery, COVID-19 resurgence is walking back investor thoughts of an oil supercycle down to a very wobbly monocycle on this bumpy road to recovery.

After a wave of possible stop losses getting triggered below Brent 62.50, oil has found some legs on the back of robust US economic data and oil prices self-correcting nature via a weaker US dollar.

Perhaps compounding matters overnight, China counties to buy Iranian oil, which is perhaps the most significant risk to rebalancing markets and pushing global inventories lower, especially as OPEC revisits their taper strategy.

In light of the COVID resurgence, markets could also be having a case of post-taper indigestion with Saudi Arabia. Instead of waiting for more tangible confirmation that demand has all but fully recovered, the Kingdom will gradually return its voluntary one mbd of cuts, upping the potential return of more barrels. Overall, the alliance will boost its production by 600 kbd in May, 700 kbd in June and 841 kbd in July.

When you factor in 1-1.5 mbd Iranian barrels and 700 kbd, you suddenly have the potential of 2.2 mbd looking for a home.

The United States will indirectly talk about the Iran nuclear deal with diplomats from Europe, Russia and China in Vienna this week. Although the discussion doesn't mean a sudden return to the so-called Iran nuclear deal, the US's odds of lifting the sanctions on Iranian oil exports may have risen compared to a few months ago.

Finally, and although not capturing many headlines, China's central bank has asked banks to rein in credit supply on concerns that the surge in loans may fuel asset bubbles. With the commodity markets getting long in the tooth, a softening in China credit impulse can't be suitable for the medium term viewfinder. 

View single page >> |

Disclaimer: The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.