(Bloomberg) — Oil dropped alongside a broader market decline as a resurgent virus in some of the world’s top oil importers highlighted the uneven road to recovery.
West Texas Intermediate fell as much as 3% after flipping between small gains and losses earlier in the session. While the forward curve suggests growing confidence in a demand recovery, the virus is rampant in countries such as India, where annual oil imports fell for the first fiscal year since the late 1990s as refiners are cutting run-rates amid lower demand.
Still, the market is a far cry from where it was a year ago today, when the global oil market faced an unprecedented crisis, with WTI closing at -$37.63 a barrel. Prices went negative after lockdowns savaged demand and key producers Saudi Arabia and Russia flooded the market in a price war. A restoration of OPEC+ unity marked by deep supply cuts, as well as vaccine distribution around the world, have helped prices to climb back.
“The market’s recovery through the past year, though still clouded by uncertainty, makes a repeat of the April 2020 price crash highly unlikely,” said Vandana Hari, founder of Vanda Insights in Singapore. “Some of the circumstances were unique to last year and the initial weeks of the pandemic, such as the confluence of the unanticipated shock of global lockdowns and demand destruction and OPEC+ opening the spigots.”
At this juncture, the market sees many points of optimism for an upcoming surge in global oil consumption. Driving is soaring in the U.K. as more than 60% of its population over 18 has received a first vaccine dose. Vitol Group, the world’s biggest independent oil trader, expects demand to come roaring back, echoing optimistic views from OPEC and the International Energy Agency.
The forward curve suggests growing confidence — particularly as U.S. demand recovers — with some market gauges surging in recent days. Several so-called timespreads are in their strongest backwardation in a month, indicating tight supply.
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