Oil prices extended gains on Friday, recording a weekly gain of more than 6% with an improved oil demand outlook and strong economic recoveries in China and the United States, offsetting concerns about the rise in COVID-19 infections.
Analyst attributed the market’s growth to strong economic recoveries around the world and supply curbs by OPEC and its allies OPEC+ and cautious response to higher prices by U.S. oil producers.
China’s 2021 net crude oil imports are forecast to grow 3.4% this year versus 2020 to about 11.2 million barrels per day, a unit of top oil and gas group China National Petroleum Company said.
Additionally, China also reported a record 18.3% jump in economic growth in the first quarter from a coronavirus-induced slump earlier last year.
“We still think there’s a clear risk prices could rise up to $70 a barrel before we see a more meaningful pullback,” Westpac Senior Economist Justin Smirk.
However, the longer prices stay elevated, the more supply is likely to return to the market, and the risks of COVID-19 cases spiking in places like India and Europe could eventually drive prices down.
The rising cases of COVID-19 continue to bring distress to the market, with India passing the 200,000 daily infections for the first time on Thursday.
As a result of the prevailing coronavirus pandemic, Investors expect oil prices to edge lower in the following weeks saying taking into account worsening coronavirus developments in some countries, crude overshot to the upside this week and a pullback is now due.
Currently, a strong jump in U.S. retail sales, a drop in unemployment claims and signs of more cars on the road in the world’s biggest economy supported the market.
Traders are looking ahead to a pick-up in traffic typical in the United States in June through August.
“With miles driven on the U.S. highways up for the first time since the pandemic outbreak, it means we are well on the way to a bountiful U.S. summer driving season that could come close to matching the summer of 2019,” Axi chief Global Market Strategist Stephen Innes