Early on Friday, oil prices made an attempt to recover. Market participants are trying to recoup losses after a significant sell-off that occurred yesterday.
As a result, Brent futures for May delivery added 0.21% to trade at $63.41, whereas WTI futures for April delivery inched up by 0.2% to settle at $60.12 per barrel.
Yesterday, on the New York Mercantile Exchange (NYMEX), WTI crude dropped by 7.1% to $60 per barrel. This was the fifth decline in a row. Curiously, at the beginning of the month, the price was hovering near its two-year high above $66 per barrel. At the same time, Brent futures slumped by 6.9% to $63.28 per barrel.
This collapse in oil prices was mainly caused by concerns over the future oil demand. The fact is some European countries have refused to use the AstraZeneca vaccine due to its side effects. This news may have a downward pressure on oil demand. Moreover, economic recovery in most European countries may significantly slow down amid such a decision. Even the report provided by the European Medicines Agency failed to improve the situation. According to the analysis, the advantages of the vaccine significantly exceed its side effects.
Moreover, data on oil reserves also led to lower prices. Thus, the report unveiled that oil market supply remained high. Most traders are also concerned about the fact that in the Asian region, demand has been stable recently. However, in the near future, predictions may not come true because of closed borders and new lockdown measures.
Experts suppose that the market overheating is one more reason for a slump in oil prices. Notably, some analysts suppose that the current sell-off after a spectacular rally is just a short-term phenomenon. Moreover, traders may benefit from the current situation, opening profitable buy positions. In a short-term perspective, experts foresee a rise in oil prices, if the mass vaccination program results in higher mobility of people. This, in turn, will lead to a bigger number of flights that will boost oil demand. Importantly, most economists think that oil demand recovery will be uneven.
Of course, the cut in global oil output performed by the world's largest oil producers, including Saudi Arabia, has significantly supported oil prices. However, the impressive slump, which occurred on Thursday, proved that the current demand is too low to push the price above the existing range. At the same time, OPEC production quotas are expected to keep oil prices near the current levels.
According to the recent report from the US Department of Energy, oil supply in the US market remains quite high. Last week, US oil reserves increased, exceeding the average five-year reading by 6%. At the same time, the market is still recovering after extremely cold weather in Texas.