Crude oil futures dipped in mid-morning Asian trade April 4 on reports that Yemeni Houthi rebels have signed a truce with Saudi Arabia, removing one potential supply disruption source in oil markets, says an article published in S&P Global.
Yemen Houthi rebels
At 10:12 am Singapore time (0212 GMT), the ICE June Brent futures contract was down 42 cents/b (0.4%) from the previous close at $103.97/b, while the NYMEX May light sweet crude contract fell 26 cents/b (0.26%) to $99.01/b.
Yemeni Houthi rebels late April 1 agreed to a two-month ceasefire with a Saudi-led coalition starting April 2, the first day of the Muslim holy month of Ramadan, according to media reports.
Yemen has witnessed fierce fighting between both sides since 2015, leading to occasional oil supply disruptions as the rebels target oil infrastructure in Saudi Arabia.
The most recent attack occurred on March 25, when Houthi rebels launched attacks on a petroleum products storage facility in Jeddah, as well as other refineries and sites in the kingdom. Crude prices had jumped by more than $4/b in response.
Key Concern
“Oil is opening slightly lower in Asia after a media report suggests the Houthi group agreed to a 60-day truce with Saudi Arabia that temporarily reduces one potential supply disruption source,” said SPI Asset Management Managing Partner Stephen Innes in a April 4 note.
“Still, the fragile detente does little to alleviate the absence of Russian oil.”
Russian oil remained a key concern for market watchers. The European Union on April 3 called for more sanctions against Russia, with EU ministers discussing ending Russian energy imports, after Ukraine accused Russian forces of war crimes near Kyiv.
Any further ban on Russian energy imports by Europe will likely throw oil markets into disarray.
Russian gas accounted for around 45% of EU gas imports and close to 40% of its total gas consumption in 2021, while about 2.7 million b/d of Russian crude were exported to the EU, or around a quarter of total EU imports, before the invasion of Ukraine.
COVID in china
Meanwhile, investors were also keeping a close watch on COVID-19 cases in China, where authorities have yet to stall a surge in infections in the country.
Shanghai, currently the epicentre of the outbreak in China along with the northeastern province of Jilin, reported 425 symptomatic cases and 8,581 asymptomatic cases on April 3, the local government said on its official WeChat account April 4. The city is in the middle of a two-stage lockdown as authorities mass-test the entire population for COVID-19.
“Virus risks in China remain a concern, with the country adding more than 13,000 new COVID-19 infections and the emergence of new subtypes of the Omicron variant,” said IG market strategist Yeap Jun Rong April 4. “Mass testing ahead may lift the virus cases’ figures further, potentially putting a cap on risk sentiments while greater clarity on the extent of virus spreads awaits.”
Dubai crude swap
Dubai crude swaps were higher in mid-morning trade in Asia April 4 from the previous close, while intermonth spreads were lower.
The June Dubai swap was pegged at $96.61/b at 10 am Singapore time (0200 GMT), up $1.04/b (1.09%) from the April 1 Asian market close.
The May-June Dubai swap intermonth spread was pegged at $1.50/b at 10 am, down 45 cents/b over the same period, and the June-July intermonth spread was pegged at 95 cents/b, down 21 cents/b.
The June Brent/Dubai EFS was pegged at $7.05/b, down $1.02/b.
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Source: S&P Global
