Oil prices move lower amid the threat of new lockdown measures in Europe as well as a number of other significant factors. Restrictions imposed on business activity and social life are the main limiting factors for the oil market.
Earlier, oil quotes were actively growing amid investors' hopes for a quick recovery of the global economy. Trader's optimism was supported by the gradual lifting of quarantine restrictions in many countries worldwide. However, today it is clear that this market euphoria was premature. In many European countries, a new strain of coronavirus is being discovered. It is recognized to be more contagious than the previous one. So, last weekend, Italy announced a partial lockdown.
However, not only Europe is struggling with the rise of new Covid-19 cases. In New Jersey, Michigan, as well as in other several US states, the number of new coronavirus cases is also increasing. If other regions of the United States become affected, it could undermine all the recent efforts made by the new US administration to revive the American economy. Although the vaccination program is being implemented in the United States at a rapid pace, short-term risks remain.
Brent futures contract slipped into negative territory today and was trading at around $67.78 per barrel. WTI futures for April settled at $64.22 per barrel.
Despite the negative dynamics, Brent still has high upside potential. It can be supported by strong statistics from China which is the world's largest oil consumer. This year, Chinese industrial production is up by 35.1% in the period from January to February compared to the same period last year. By the way, analysts predicted that industrial output would grow by only 30.5%. In addition, the volume of refined oil in China rose by 15% in January-February compared to the same period last year.
Investors assume that Brent may well set a new record and rise to $80 per barrel in the second quarter of 2021. Analysts predict that this rise will happen thanks to the lifting of quarantine measures and a rapid economic recovery. Global oil demand is expected to recover by about 6 million barrels per day to reach the levels of 2020.
