Crude oil prices off the boil as Brent slips below $63; here’s why

Updated : March 19, 2021 02:15 PM IST

Brent oil plunged below $63, while the US WTI crude fell below $60.

On MCX, crude oil April futures were also trading with a loss of more than 2 percent below Rs 4,400 level.

Crude oil prices extended losses for the sixth day on Friday as the hopes for a demand recovery dampened after concerns over a new wave of COVID-19 cases across Europe.

Brent oil plunged below $63, while the US WTI crude fell below $60. Oil is down nearly 10 percent this week. On MCX, crude oil April futures were also trading with a loss of more than 2 percent below Rs 4,400 level.

“Crude oil prices have plunged on concerns over falling demand as lockdowns are being reimposed in several European countries. Problems with respect to COVID-19 vaccine roll‑out in Europe and other parts of the world are also pressuring crude oil prices,” said Jigar Trivedi, Fundamental Research Analyst – Commodities, Anand Rathi Securities.

Here are the important reasons behind a fall in crude oil prices:

Surging COVID-19 cases in Europe

A new wave of COVID-19 infections has emerged in European countries. This led to many countries imposing lockdowns dampening hopes for a recovery in demand for fuel.

Germany is seeing rising coronavirus cases, Italy is imposing a nationwide Easter lockdown and France plans to impose tougher curbs. Concerns about a likely drop in energy demand weighed on oil prices.

Slowdown in Vaccination Program

Several European countries have temporarily suspended the use of AstraZeneca’s COVID-19 vaccine on worries over possible side effects. The countries halted their rollouts of AstraZeneca jabs over blood clot fears, although the WHO said there was no established link to the vaccine.

However, Germany, France and other countries have since announced the resumption of inoculations after regulators declared the AstraZeneca vaccine safe, but the programme halt has made it harder to overcome resistance to vaccines among some of the population, a Reuters report said.

This slowdown in vaccination programs in Europe and the restrictions to control the spread of coronavirus have reduced hopes of a recovery in demand for fuel.

High Oil Supplies

Saudi Arabia’s crude exports increased in January for a seventh straight month to the highest since April 2020, according to the Joint Organisations Data Initiative website. The crude oil supplies are high as the shipments from the world’s biggest oil exporter increased to 6.582 million barrels per day in January from 6.495 million the previous month.

Rising US Inventories

Crude oil inventories in the US rose for the fourth straight week after severe cold weather in Texas and the central part of the country in February forced shutdowns at refineries. Traders said stockpiles could grow further after WTI on March 12 switched from backwardation to contango, where front-month contracts are cheaper than the second month, Reuters reported.

Strength in US Dollar

A stronger US dollar also led to a sell-off in crude oil. A stronger dollar makes oil more expensive for holders of other currencies.

Published : March 19, 2021 02:15 PM IST

Crude oil prices off the boil as Brent slips below $63; here’s why

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