Brent oil edged lower as trading started in Asia, struggling to hold on to a bounce at the end of the worst week since October.
Futures in London slipped 0.5% on Monday after jumping 2% on Friday. Despite the gain in the previous session, crude still capped a significant weekly loss amid a combination of factors including a softening physical oil market, U.S. dollar strength and the unwinding of long positions. Concerns about near-term demand and the uneven recovery from the pandemic also continue to linger.
Saudi Arabia, meanwhile, saw another assault on its energy facilities. While the offensive by Iran-backed Houthi rebels on an Aramco (SE:2222) refinery on Friday had no impact on oil supplies, it’s the latest in a series of attacks on the kingdom.
Despite the weekly plunge, there’s confidence in the outlook for demand and stronger prices. Goldman Sachs Group Inc (NYSE:GS). said the plunge was transient and that the rapid rebalancing would continue with virus vaccinations driving higher mobility. The market will be keenly watching the OPEC+ meeting next week for any change to its output policy in May, especially after the slide in oil and comments from the International Energy Agency that supply is plentiful.
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The prompt timespread for Brent is still in a bullish backwardation — where near-dated prices are more expensive than later-dated ones — although the gap narrowed over the course of last week. The spread for WTI, however, firmed in contango after flipping into the bearish structure on March 12.