WTI suffering from selling pressure, but holds above $64.00 for now

• Crude oil has been on the back foot on Tuesday, weighed by European vaccine rollout concerns and soft US data.
• WTI is currently consolidating just above the $64.00 level.

As has been the case since the start of the week, crude oil markets continue to trade with a negative bias and the American benchmark for sweet light crude oil, called WTI, is now consolidating just above the $64.00 level (per barrel), down around 2.0% or $1.30 on the session.

Weakness is also being seen in the time spread of WTI futures markets; front-month futures contracts (for delivery in April) are in contango with WTI futures contracts for May delivery, i.e. the price of May delivery crude oil is higher than April delivery. This is an indication that markets see short-term weakness in demand.

Note that the rest of the WTI futures time spread is in backwardation (meaning crude oil prices drop each month forward you go), which has bullish implications in the long-run as it implies strength in medium-term demand.

Driving the day

In terms of supply-side news, there has been very little for crude oil traders to go off of so far this week. Focus has for the most part been on demand-side factors and, thus, concerning news about Eurozone countries halting their AstraZeneca vaccine rollouts (despite the central EU health authority just coming out and vouching for the safety of the vaccine, alongside UK authorities) is weighing on crude prices; the EU’s vaccine rollout is already going at a snail's pace compared to that in the UK and US and has already prompted some energy analysts to downgrade their forecasts for crude oil demand growth this year (given expectations for a slower European economic rebound). The latest actions will further slow the Eurozone’s march towards herd-immunity and thus will further slow its recovery.

Recent data out of the US has also not helped; US Retail Sales dropped more than expected in February, but that mostly represents the fading boost of January’s stimulus cheques. Retail sales will undoubtedly jump again in March after the government hands out another $1400 to each US citizen. More concerning was the larger than expected drop in Industrial Production in February and this seems to have added to crude oil’s selling pressure; analysts note that poor weather conditions last month contributed to the drop, but note also that global supply shortages also played a factor and this could be a longer-lasting drag.

Focus will now turn to the release of weekly private API crude oil inventory numbers; the data is likely to still be distorted by the impact of February weather disruptions, with crude oil inventories rising in recent weeks, but gasoline and distillate inventories falling given that it has taken US refiners longer to recover from the bad weather than oil producers.