FX.co ★ Oil collapses amid spasmodic global demand and stronger US dollar

Oil collapsed this month, as a spasmodic rebound in global demand and stronger US dollar curbed the rise in oil prices.

In fact, last Friday, Brent futures fell by 0.6%, while WTI slipped after rising constantly for the last three weeks. Apparently, the new surge in bond volatility provoked traders to take risks in the markets, which resulted in a massive decline in US stocks and increase in the US dollar. At the same time, fuel sales in India fell in February, although demand in the US and UK continued to grow.

At first, Brent was rallying above $ 70 last week, after rebels attacked Saudi Arabian oil infrastructures. However, afterwards, it retreated, as the market was facing opposition from OPEC by deciding to keep oil production stable, and higher prices are boosting US shale production.

Bart Melek of TD Securities said demand may surge this April and May. However, supply will remain limited due to OPEC's production cuts. Some refiners in Europe and Asia should also receive less oil next month, lower than what they have requested from Saudi Arabia. It should be approximately 20% less than requested.

And this week, the International Energy Agency (IEA) will publish its forecasts for global oil demand. At the same time, investors will also be keeping an eye on the state of US-China relations, following the meeting scheduled on March 18-19.

Asia's transformation into a global superpower in natural gas trading will also dictate market rates in Europe. This was significantly highlighted this winter, when cold temperatures in the northern hemisphere meant LPG tankers were being delivered to Asia, the largest consumer of fuel, and where sellers could get record prices. It led to a sharp market growth in Europe and, conversely, now acts as a price brake as winter ends and LNG supplies return to the region.

"Over the next two years, European gas prices will become less Europe-oriented and more influenced by global factors," said Andy Sommer of Axpo Solutions AG.

Even with multiple pipeline options available, Europe's dependence on imports is increasing amid falling domestic production due to aging fields in the North Sea. LNG transported across oceans is also expanding faster, mainly driven by demand in Asia.

And in the coming years, Europe will have to compete for LNG with consumers in China, India, Pakistan and Bangladesh. In addition, new markets have yet to open up, as some Asian countries are just starting to use gas to generate electricity instead of the more polluting coal and fuel oil. Tougher climate targets in Europe should also lead to the displacement of gas from renewable energy sources.

"It can be compared to the coal market," Sommer said. "Asia has always been an anchor for European coal prices. The same is happening in the gas market. "

LNG production is growing mainly in countries relatively close to Europe. But the addition of new stations in regions closer to Asian buyers has now slowed, which is believed to increase the interconnectedness of gas markets around the world.