WTI crude had another dismal day, plunging over 6% on Tuesday. Rising virus cases in Europe are proving to be the catalyst in oil’s selloff. Bart Melek, Head of Commodity Strategy at TD Securities, notes that WTI has room to sink to the $52 level.
“The swing lower was triggered by the deteriorating near-term demand outlook in the face of still hampered refineries, surging interest rates and renewed European lockdowns. Expectations that China will import more Iranian oil also played a roll in driving crude prices lower.”
“Given that many in the market believe that Chinese imports of Iranian oil will increase to as much as 856,000 bpd (+129% from February), and considering that the sudden influx of Iranian oil is causing congestion in ports, as tankers are offloaded, there may be less able to offload supplies from other sources. This in combination with Saudi Arabia possibly reversing its one million b/d production cuts, and more OPEC+ oil overall could mean that WTI is at risk of correcting all the way down to $52/b.”