Crude oil futures were higher in mid-morning Asian trade March 21, as the supply outlook remained tight on the back of reduced Russian supplies and a continued recovery in global oil demand from the COVID-19 hit, says an article published in Platts.
Falling pandemic cases in China also boosted investor sentiment.
At 11:00 am Singapore time (0300 GMT), the ICE May Brent futures contract was up $3.15/b (2.92%) from the previous close at $111.08/b, while the NYMEX April light sweet crude contract rose $3.26/b (3.11%) at $107.96/b.
“The market continues to fret about supply disruptions, with data suggesting they are already impacting,” said ANZ Research analysts Brian Martin and Daniel Hynes in a Mar. 21 note.
The International Energy Agency late last week warned of a potential global oil supply shock, with an estimated 3 million b/d of Russian oil production likely to be shut in next month due to sanctions and buyers shunning the major exporter.
The IEA forecast a crude oil deficit in the supply-demand balance of 700,000 b/d in the second quarter, assuming Middle East producers in the OPEC+ group stick with their current quota plans as expected, as well as a continued potential supply deficit crunch in Q3.
Despite a sharp drop in ICE Brent crude prices in recent weeks from a 13-year high of $139/b in early March, analysts said oil prices were poised for a rebound in the absence of a quick fix in the supply-demand gap.
US oil production has remained unchanged at 11.6 million b/d for the prior five weeks up till March 11, most recent data from the Energy Information Administration showed.
In China, falling COVID-19 cases calmed investor fears of infections spiraling out of control in the world’s second largest economy. The country’s National Health Commission reported 1,656 locally transmitted cases on Mar. 19, down from 2,157 the previous day.
“Falling new cases underscored the country’s prompt and stringent measures, including lockdowns and mass tests, in containing the rapid spread of the virus. This may help to boost investor confidence amid the country’s most severe viral outbreak since 2020,” said IG DailyFX strategist Margaret Yang in a Mar. 21 note.
Dubai crude swaps were higher in mid-morning trade in Asia March 21 from the previous close, though inter-month spreads and the Brent/Dubai Exchange of Futures for Swaps spread were lower.
The May Dubai swap was pegged at $101.83/b at 11 am Singapore time (0300 GMT), up $3.30/b (3.35%) from the Asian market close March 18.
The April-May Dubai swap intermonth spread was pegged at $3.37/b at 11 am, down 10 cents/b over the same period, and the May-June intermonth spread was pegged at $2.12/b, down 4 cents/b.
The May Brent/Dubai EFS was pegged at $9.25/b, down 41 cents/b.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!