It looks set to be a tough day for energy producers such as Beach Energy Ltd (ASX: BPT), Santos Ltd (ASX: STO), and Woodside Petroleum Limited (ASX: WPL) on Friday.
This follows a disappointing night of trade for oil prices which saw the price of both Brent and WTI crude oil crash lower.
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What happened?
Oil prices sank for the fifth day in a row on Thursday night after a strengthening US dollar, a stuttering COVID-19 vaccine rollout, and rising US crude and fuel inventories weighed heavily on sentiment.
According to CNBC, the Brent crude oil price fell 7% to settle at US$63.28 per barrel and the WTI crude oil price settled 7.1% lower at US$60 per barrel.
In respect to inventories, on Wednesday the U.S. Energy Information Administration (EIA) revealed that U.S. crude inventories rose by 2.4 million barrels last week.
Where next for oil?
Tamas Varga from PVM Oil Associates told CNBC that he believes short term factors are weighing on prices and remains positive on oil for the longer term.
He commented: "Short-term developments – stuttering vaccine rollouts and the build in U.S. oil inventories – are driving sentiment, but the longer-term oil outlook is still encouraging. Yesterday's U.S. Federal Reserve meeting provided a boost to equities … U.S. economic growth has been revised upwards while unemployment is expected to decline."
One spot of good news for oil prices this morning is that European regulators have found that the AstraZeneca COVID-19 vaccine is not linked to overall increased risk of blood clots.
There were fears that the suspension of this vaccine globally could lead to a return to lockdowns in some regions, tempering expectations for a recovery in fuel use. So, with its rollout likely to restart now, fuel demand could continue its recovery in the coming months.
