Oil prices are closing the week trimming some gains, but the market trend is positive and the price direction is mostly risk reduction by traders, who are also profiting from earlier gains.
Rystad Energy’s Head of Oil Markets, Bjornar Tonhaugen, has commented on the day's developments:
"Oil prices are trimming some value on Friday, reducing some risk and taking some profit from earlier gains as the end of a good week approaches.
Global oil demand is set for a massive boost in the coming months that will offset Indian demand losses and OPEC’s supply come-back, and that is why prices have been mostly rising during the week.
US consumers are a major reason markets remain bullish. China and the US locomotives are far outweighing the size of the Indian slowdown.
In the worst case, India can lose half of its 4.8 million bpd of oil consumption temporarily, and see a longer U-shaped demand recovery than the 1.0 million bpd demand loss impact we project for May.
But the Chinese and US oil demand recovery in the next 3 months alone will be above 1 million bpd and net the India demand loss out.
The rest of the World may also add around 3 million bpd to demand from here through July-August, helping explain the market’s confidence.
Although oil liquids supply surpluses are projected for April and May, these will not last deep into the summer, due to the expected global demand boost.
The decision by OPEC+ to keep their 2 million bpd oil supply increase seems justified and should not depress prices.
In fact, this summer’s tightening is not fully priced in yet, and if the India malaise starts to stabilize, oil prices can rally further into a hot, hot summer crude market.
In other bullish news, China embarks on its Golden Week holiday today, where more than 265 million passenger trips are expected by the government.
Meanwhile, the manufacturing recovery looks set to accelerate as a result of the global and especially the US economic recovery.
Friday’s price dip will not likely begin a downwards trend and is a normal market development after a spree of gains, as traders reduce risk and pocket some profits."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/30042021/oil-prices-dip-on-risk-reduction-and-profit-on-weeks-gains/