Crude oil futures joined the broader commodities market selloff to close out the second trading week of 2021. After an incredible start to the new year, oil prices pulled back on fears that China’s lockdown could impact demand volumes. Has the crude market euphoria dissipated, or is this just a temporary pause?
February West Texas Intermediate (WTI) crude futures slumped $1.24, or 2.31%, to $52.33 per barrel at 17:30 GMT on Friday on the New York Mercantile Exchange. US crude is on track for a weekly drop of 0.8%, although it remains up 8% so far this year.
Brent, the international benchmark for oil prices, is also down more than 2% at the end of the trading week. March Brent crude futures shed $1.25, or 2.22%, to $55.17 a barrel on London’s ICE Futures exchange. Brent suffered an even bigger weekly loss, sliding 2.09%.
The Baker Hughes oil rig count is nearing the 300 mark. In the week ending January 15, the number of oil and gas rigs hit 287, bringing the total rig count to 373. For 13 consecutive weeks, the figure has been above 200. This is an important metric for the energy sector because it highlights how active the US oil and gas industry is.
Despite the bullish developments, market analysts believe that oil prices have surged too quickly, which will lead to an overdue correction. Is this it? Time will tell.
Still, investors are ebullient over a reduction in the crude oil surplus, a jump in refinery activity, and rising gasoline demand. But the situation unfolding in China could be cause for concern.
China, which has become one of the top crude consumers, is facing fresh coronavirus outbreaks, forcing the government to impose new lockdowns in various regions across the country. On Wednesday, China reported 107 locally transmitted cases, with 90% of the new cases situated in the Hebei province.
But while the cases are very little compared to the number of infections in North America and Europe, authorities are not taking any chances, leading to 28 million people placed under home or hotel quarantine.
In other energy commodities, February natural gas futures picked up $0.058, or 2.21%, to $2.688 per million British thermal units (btu). February gasoline futures dropped $0.0279, or 1.8%, to $1.526 per gallon. February heating oil futures slipped $0.0293, or 1.81%, to $1.5912 a gallon.