Oil prices have fallen today over concerns about reported rising US oil storage levels and China adding travel restrictions.
Rystad Energy’s Head of Oil Markets, Bjornar Tonhaugen, has commented on today's fall in prices:
"Oil prices are declining today as oil stock levels in the US are reported to have risen, a bearish surprise development, while new restrictions in China are expected to cut oil demand during the Lunar New Year holidays.
Just when the market thought that now is the perfect time to relieve crude inventories that have been building during the demand nightmare of 2020, levels rose last week.
This means demand took a step back for both crude ad gasoline, revealing that the market - despite being on the road to a recovery - is still prone to unexpected oil-consuming behaviour.
However, a reduction in road fuels consumption is not totally unexpected as last week was the first week when most people returned to their routine after a New Year’s holiday break, a traditionally traffic-heavy period.
Traders are also closely monitoring developments in China and things are not going to the direction the market would hope for.
New restrictions will be in place during the coming holiday season and it’s sure that less fuel will be consumed than what would normally be the case.
China is a crucial market for oil, the country that helped oil demand build up again more than any other nation, and a slowdown there is always a bearish indicator.
On the US side, the enthusiasm over the new era that the Biden administration marks was met with the first decisions by the president to revoke the Keystone XL permit an to rejoin the Paris climate accord.
Although not affecting short-term balances, the decision is another indication of the new President’s attitude towards fossil fuels, a sobering action for market observers who look at the longer term.
The Biden administration’s actions are expected to reduce long term oil demand. This will not be immediately visible in his first term though, as the stimulus package and the infrastructure plan the new administration is putting forward will cause an uptick in oil consumption.
In Biden’s first year, if all promises the President gave are kept, oil demand in 2021 is expected to get a 350 000 bpd boost, compared to projections excluding political decisions.
In his second year, when the infrastructure plan has stronger legs, the added effect of the Biden presidency will reach 600 000 bpd versus where demand would normally be, 900 000 bpd if China trade tariffs are scrapped."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/21012021/oil-prices-fall-over-concerns-at-reported-rising-us-oil-storage-levels-and-china-adding-travel-restrictions/