Oil Drops With Covid-19 Risks In Europe Dimming The Demand Outlook

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Oil accelerated its decline after Britain warned it’s going to continue limiting foreign travel, dampening hopes for a summer travel boom.

Futures in NY fell the maximum amount of 5.9% on Monday, sending prices markedly below their 50-day moving average. The U.K. may delay global travel beyond May 17 if coronavirus infections still surge elsewhere around the world, adding further pressure on the immediate trajectory for consumption as governments struggle to regulate the spread of Covid-19.

Meanwhile, Iran, the U.S., and therefore the remaining members within the 2015 nuclear deal are set to collect in Vienna on Tuesday to debate potentially resurrecting the agreement, presenting a possible path toward removing sanctions on the center Eastern country’s oil exports. Yet, Iran indicated talks won’t succeed without the U.S. fully removing sanctions.

“The scales got tipped here in terms of relative oversupply for the primary time during a while,” said John Kilduff, a partner at Again Capital LLC. “There’s certainly a way within the market that the easing tensions in Iran are getting to enable a topping from supplies to the market from the country.”

After global benchmark crude futures last month suffered their worst week since October, Brent has struggled to interrupt past $65 a barrel before a full-fledged global demand recovery. More Iranian supply returning to the market and renewed lockdowns complicate the image for OPEC and its allies, which agreed last week to boost production by quite 2 million barrels each day over subsequent several months. Iran’s exports of crude, condensate, and oil products could easily reach the maximum amount of 2 million barrels each day within the coming months amid a comparatively muted U.S. response to higher shipments, consistent with consultant FGE.

Still, Goldman Sachs Group Inc. sees “a lot more” output being needed over the northern hemisphere’s summer to satisfy rising demand, and OPEC+ can adjust their decision as required when it meets next at the top of April.

Saudi Arabia on Sunday raised prices for May oil shipments to Asia. Aramco, the state energy firm, will increase its grades to the region by 20 to 50 cents a barrel from April. Most prices for northwest European customers won’t be changed, while most grades to the U.S. are going to be cut by 10 cents. The move hinted at Saudi Arabia’s confidence in Asian demand recovering further.

Brent’s nearest time spread remained in backwardation since last week — a bullish pattern during which near-term prices trade at a premium to those further out — signaling to tighten supplies