Oil fell the most in more than a week on Friday as US equities dropped from all-time highs, the US dollar firmed and demand concerns from India continued to muddle the global economic outlook.
Futures in New York slid nearly 3 percent as raw materials and US equities cooled from a scorching rally, while the US dollar climbed, making commodities priced in the currency less attractive.
A viral onslaught in India is the most notable threat to a worldwide oil recovery.
Imports from the South Asian country could fall by more than 1 million barrels a day in the coming weeks, if not three times more, consultant Kpler said in a report on Friday.
However, prices rose last month, with a slew of positive economic data and signs of a budding fuel consumption revival in key economies offsetting the worsening crisis in India.
Futures in New York rose for the week, extending its monthly gain to 7.5 percent.
OPEC and its allies see world consumption rebounding by 6 million barrels a day this year, while Goldman Sachs Group Inc this week said that demand could post a record jump as vaccination rates increase.
The near-certain likelihood of higher fuel consumption in the US, China and the UK have brightened the overall outlook, with traders betting that a steady reopening of economies will continue to improve demand.
“This unbridled optimism on demand is taking a pause” as the crisis in India is getting worse, Commodity Research Group senior partner Andrew Lebow said.
However, OPEC+ can react quickly if demand drops more than expected, giving the market confidence going forward, Lebow said.
“The US is going to lead the demand recovery” and “now that COVID cases are declining across most of western Europe, there’s excitement around a strong pickup in global economic activity and improved air travel in the coming months,” Oanda Corp senior market analyst Edward Moya said.
However, “to take out the March highs, the situation in India needs to be heading in the right direction,” he added.
West Texas Intermediate for June delivery on Friday fell US$1.43 to settle at US$63.58 a barrel, up 2.3 percent for the week.
Brent crude for June delivery on Friday fell US$1.29 to US$66.76 a barrel, up 2 percent weekly.
Goldman Sachs Group Inc this week said demand could post a record jump as vaccination rates increase, while Bank of America Global Research flagged that the summer travel increase could be “significantly more robust” than is being priced in.
“Global oil demand is set for a massive boost in the coming months that will offset Indian demand losses and OPEC’s supply comeback, and that is why prices have been mostly rising during the week,” Rystad Energy head of oil markets Bjornar Tonhaugen said. “This summer’s tightening is not fully priced in yet, and if the India malaise starts to stabilize, oil prices can rally further into a hot, hot summer crude market.”
Oil’s overall advance is in keeping with a broad-based surge in interest in commodities this week, driven by optimism in key economies and tightening supplies of raw materials.
That ha pushed the Bloomberg Spot Commodity Index to the highest level since 2012 in previous sessions.
Some technical gauges of market health reflect the short-term risks to oil demand. The structure of the Middle Eastern Dubai benchmark flipped to a slight contango on Thursday, an indication that market tightness might be easing. The bullish backwardation structure in the prompt timespread for Brent crude has also softened in recent sessions from an intraday high of US$0.72 a barrel at the start of the week.
Additional reporting by staff writer
INVESTOR RESILIENCE? An analyst said that despite near-term pressures, foreign investors tend to view NT dollar strength as a positive signal for valuation multiples Morgan Stanley has flagged a potential 10 percent revenue decline for Taiwan’s tech hardware sector this year, as a sharp appreciation of the New Taiwan dollar begins to dent the earnings power of major exporters. In what appears to be the first such warning from a major foreign brokerage, the US investment bank said the currency’s strength — fueled by foreign capital inflows and expectations of US interest rate cuts — is compressing profit margins for manufacturers with heavy exposure to US dollar-denominated revenues. The local currency has surged about 10 percent against the greenback over the past quarter and yesterday breached
MARKET FACTORS: Navitas Semiconductor Inc said that Powerchip is to take over from TSMC as its supplier of high-voltage gallium nitride chips Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday in a statement said that it would phase out its compound semiconductor gallium nitride (GaN) business over the next two years, citing market dynamics. The decision would not affect its financial targets announced previously, the world’s biggest contract chipmaker said. “We are working closely with our customers to ensure a smooth transition and remain committed to meeting their needs during this period,” it said. “Our focus continues to be on delivering sustained value to our partners and the market.” TSMC’s latest move came unexpectedly, as the chipmaker had said in its annual report that it has
SECURITY WARNING: The company possesses key 3-nanometer technology, and Taiwan should prevent it from being transferred to China, a lawmaker said The Ministry of Economic Affairs yesterday said it would conduct a “strict review” of any proposed acquisition of Taiwanese tech company Source Photonics Co (索爾思光電), following media reports that a Chinese firm was planning to buy the company in the Hsinchu Science Park (新竹科學園區). Local media reported that Suzhou Dongshan Precision Manufacturing Co (東山精密), China’s largest printed circuit board manufacturer, had announced plans to acquire Source Photonics for 5.9 billion yuan (US$823.1 million). The ministry said it has not received an application from Source Photonics and has formally notified the company that any buyout would constitute a change in its ownership structure. The
ELECTRONICS: Strong growth in cloud services and smart consumer electronics offset computing declines, helping the company to maintain sales momentum, Hon Hai said Hon Hai Precision Industry Co (鴻海精密) on Saturday announced that its sales for last month rose 10 percent year-on-year, driven by strong growth in cloud and networking products amid the ongoing artificial intelligence (AI) boom. The company, also known internationally as Foxconn Technology Group (富士康科技集團), reported consolidated sales of NT$540.24 billion (US$18.67 billion) for the month, the highest ever for the period, and a 10.09 percent increase from a year earlier, although it was down 12.26 percent from the previous month. Hon Hai, which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators, said its cloud
RSS