In fact, the price correction is borderline comical, Corvalin calculates.
“The lack of discretionary buying activity in the face of a new uncertain variant of COVID has left prices in free fall and pricing in expectations of poor demand. We estimate based on our pricing model, that the market has now priced giant c..7MB/ Dr [millions of barrels per day] Corvalin noted in a new research note on Wednesday that negative demand hit over the next three months, with the OPEC+ response unbalanced.
Corvalin added, “To put this in context, this would represent any of these extreme outcomes: (1) not a single aircraft has flown around the world for three months, (2) half the intensity of the global shutdown 2Q20, or (3) a world worse off than Vaccinations Ahead: Global demand for aircraft dropped to last winter’s level (-1 MB/d), twice as much EU demand as last winter’s Alpha variant (-2 MB/day) and twice as much as Chinese demand as this summer’s Delta variant (- 1 million b/d.) The relatively parallel nature of the sell-off, with back prices down $7 a barrel, can also be explained as hitting market prices under shallow but longer demand: 4 million b/d over 3 months with 3 million b/d. barrels per day of this lasting effect offset by higher OPEC+ spare production capacity.”
West Texas Intermediate crude oil prices are down 12% since November 24 on concerns that the new alternative will hamper global demand. As Yahoo Finance Jared Bleecker He notes that oil prices are now down about 23% from their recent high.
Shares of oil majors Exxon and BP have fallen 7.2% and 9.8%, respectively, in the past five sessions, according to Yahoo Finance Plus data.
The oil sell-off comes amid a violent market slump last week, which continued on Tuesday.
The Dow Jones Industrial Average fell 652 points In Tuesday’s trading, while the Nasdaq Composite and the S&P 500 were also deeply in the red. All components of the Dao Thirty It was red for the session, except for An apple and Merck.
Corvalin believes that the sharp decline in oil prices appears to be an exaggeration.
“We consider the downward movement in prices to be excessive but understandable in the context of reduced year-end liquidity and risk appetite. Given the significant uncertainties at this time, we await further news on the development of the variable and additional restrictions imposed before updating our supply and demand balances and price forecasts. Oil, although once again reaffirming our view that the market has outlived the potential impact of the latest variable on oil demand with a structural repricing up due to the dramatic change in the oil supply reaction function that remains ahead of us,” Corvalin noted.