Commodity Update March 25, 2021: Analyst Sees Short-Term Positive Sentiment on Oil Spike

Commodity update as of 9:25 local time in Thailand on March 25, 2021

 

Yesterday, oil prices edged higher on the report of the Ever Given, a massive cargo ship has run aground in the Suez Canal, temporarily blocking shipment flows. The international benchmark Brent crude closed 5.95% higher while WTI rose 5.92%. However, after a sharp spike, oil prices slipped more than 1% in the morning session on Thursday.

Asia Wealth Securities (AWS) viewed the event as a positive sentiment just for the short term on oil prices from the supply of crude oil that is expected to be affected by the event. However, crude oil prices still have negative factors pending at (1) crude oil reserves continue to increase which the U.S. Government’s Energy Information Administration (EIA) reported a 1.912mn barrel increase in the U.S. crude oil reserves last week. (Ended 19 Mar), in contrast to the market consensus expected to drop 272,000 barrels (2) concerns about the COVID-19 situation and expanding lockdown measures in Europe which still a negative factor in the recovery of oil demand and (3) OPEC+ meeting (1 Apr), AWS assessed that there is a possibility to see a reduction in output measures. This will make the crude oil market worry about supply problems again.

AWS recommended short-term speculation in Energy stocks from recovering crude oil prices and valuation reversing upside from previous downturns, but it remains a negative view on crude oil prices for the remainder of 1H21.