Crude oil futures regained some strength in mid-morning trade in Asia April 6 on the back of a weaker US dollar and healthy US economic data, after a steep selloff overnight, reports platts.
ICE Brent June Contract
At 10:41 am Singapore time (0241 GMT), the ICE Brent June contract was up 58 cents/b (0.93%) from the April 5 settle at $62.73/b, while the June NYMEX light sweet crude contract was 61 cents/b (1.04%) higher at $59.29/b. The markers fell $2.71/b and $2.80/b respectively April 5 after OPEC+ abruptly agreed April 1 to loosen its quotas and add more than 2 million b/d into the market by July.
“Yesterday’s selloff was predictable, because the initial price reaction to OPEC+’s decision to roll back production cuts was incongruent. The market may have swung too much on the other side, and is correcting today,” Vandana Hari, CEO of Vanda Insights, told S&P Global Platts April 6. “The US dollar also weakened considerably, and the upbeat US jobs report is reflecting an accelerating recovery in the US.”
Trade-Weighted Basket
The US Dollar Index, which measures the US dollar against a trade-weighted basket of six major currencies, slipped 0.49% to 92.595 April 5 and continued to move sideways in mid-morning trade in Asia April 6 to stand at 92.665 at 10:41 am Singapore time.
A higher-than-expected increase in latest US employment data and a strong recovery in the manufacturing and service industries was also boosting market sentiment, according to analysts.
“While employment remains down on its pre-pandemic peak by more than 8 million, increased fiscal stimulus alongside an accelerating pace of vaccine rollout suggests there’s plenty more momentum building in the pipeline,” ANZ Research analysts said in an April. 6 note.
Lid on Prices
However, the crude oil market continues to face headwinds from both demand and supply fundamentals, which may keep a lid on prices, the ANZ analysts said, adding: “Rising virus cases in countries such as India and the European Union are keeping traders cautious, with any renewed restrictions likely to weigh on demand.”
On the supply side, the phased rollback of production cuts by OPEC+ and Saudi Arabia is being supplemented by a potential increase in Iranian crude exports, which may leave a surplus if demand recovery does not keep pace.
Resuscitate the Nuclear Deal
The US and Iran are set to hold indirect talks in Vienna later April 6, along with the EU, China and Russia, in an attempt to resuscitate the nuclear deal that waived sanctions on Iran’s oil sector in exchange for restrictions on its nuclear activities, Platts reported earlier.
“Although the discussion doesn’t mean a sudden return to the so-called Iran nuclear deal, the US’ odds of lifting the sanctions on Iranian oil exports may have risen compared to a few months ago,” said Stephen Innes, chief global markets strategist, Axi, in an April 6 note.
Oil Inventory Reports
Market participants will also look to the weekly US oil inventory reports by the American Petroleum Institute and the US Energy Information Administration, due for release later April 6 and April 7 respectively, for fresh pricing cues on the supply outlook.
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Source: S&P Global
