Oil prices ended on a positive note in April, with a slew of positive economic data and signs of a budding summer fuel consumption revival in the US offsetting a worsening coronavirus crisis in countries like India and Japan.
There is a tug of war between supportive news from the US, the world’s largest oil consumer, and downbeat reports from India, the third-biggest consumer. The US is, however, going to lead the demand recovery and now that COVID-19 cases are declining across most of Europe, there is excitement around a strong pick-up in global economic activity and improved air travel in the coming months.
In China, meanwhile, there is no cause for concern. The country China appears to be containing the spread of the virus reasonably well with accelerated vaccine rollout. Its economic growth is pretty impressive even though it was the epicentre of the outbreak in the initial days. Analysts believe the demand for crude oil will grow as the economy goes full steam.
Iran sanction worries are back with a strong possibility of the country agreeing to a new nuclear deal and if that happens, it will waste no time in selling its most precious commodity, the crude oil, to revive its economy, battered by three-year US sanctions and the pandemic.
It can raise its exports to 2.5 million barrels a day once the sanctions are lifted. When Iranian oil reaches the market, there will be a measurable effect on the supply of the commodity. With the presidential elections in Iran just two months away, Iranians cannot afford to lose a moderate statesman in their hour of need. The US, too, cannot let this opportunity slip away before a hardliner takes up the reins in Iran. There have been reports that China continued to buy Iranian oil despite the sanctions. It will only step it up if the sanctions end, as China’s economy is growing again.
Iran supplied 2,00,000 barrels a day in April to reach an output of 2.5 million barrels per day. As a result, the total production of all 13 members of OPEC rose by 1,00,000 barrels a day month-over-month to 25.17 million barrels per day in April.
Oil prices Given that OPEC+ will start to gradually ease production cuts this month, along with Saudi Arabia, markets could see almost 530Mbbls/d of additional supply coming back over May.
Russia’s production data for April shows that crude oil and condensate production averaged 10.46MMbbls/d, up from 10.26MMbbls/d the month before. This can lead to a glut when markets are in dire need of a supply-demand balance.
On vaccine optimism, unfortunately, not all national campaigns are equal. While the US and the UK have administered enough shots to protect more than one-third of their populations, they are in a very small group of countries to have reached that milestone.
In Europe and Canada, vaccination rates are roughly half that level. Other parts of the world like India, Japan and Brazil are even further beh