Oil prices eased on Friday as concerns about the patchy roll-out of COVID-19 vaccinations around the globe tempered optimism over recovering fuel demand.
Brent crude was down 13 cents, or 0.2%, at $71.18 a barrel by 0504 GMT, after falling 4 cents on Thursday following a gain to the highest since May 2019. The contract is on track for a gain of over 2% this week.
U.S. oil fell 10 cents, or 0.2%, to $68.71, having dropped 2 cents in the previous session, while heading for a gain of nearly 4% this week.
“The upward momentum appears to have been exhausted, making way for some profit-taking. But I expect the pullback to be modest, as the broader narrative of a strong U.S. economic and oil demand rebound is well-entrenched,” said Vandana Hari, energy analyst at Vanda Insights.
Both contracts climbed about $5 each in the past two weeks amid optimism that global demand for fuel was recovering from the depths of the pandemic.
“We continue to view oil demand recovery as largely a function of vaccinations,” JPMorgan Chase commodities analysts said in a note.
“America and Europe are well advanced in their inoculation efforts,” analysts noted, but sluggish vaccination roll-outs in developed and emerging Asian countries alike mean “there is no clear end in sight to social distancing restrictions in the region.”
More than 170 million people have contracted the virus globally, while the death toll approaches 3.8 million, as the second year of the worst global health crisis in a century shows no sign of ending soon.
Prices rose earlier this week as the Organization of the Petroleum Exporting Countries (OPEC) and its allies in the grouping known as OPEC+ predicted demand will exceed supply in the second half of 2021. OPEC+ agreed on Tuesday to continue with supply restraints through July, lifting prices.
Slow progress of the Iran nuclear talks is also expected to provide breathing room for demand to catch up before Iranian oil returns to the market if a deal is reached.
But the slow roll-out of vaccinations and high infections in countries like Brazil and India are hitting demand prospects in the world’s high-growth markets for crude oil and refined products.
Meanwhile U.S. crude inventories dropped more than forecast last week although fuel stocks rose, suggesting demand for end-products is not matching refinery output.
“With the week’s big news and data on the EIA, OPEC+ and Iran fronts digested, the complex will likely go back to tracking sentiment in the broader financial markets and the next checkpoint for that is the U.S. May jobs data due out later today,” said Hari.