Oil Prices Slip From a Six Week High, Rising Cases of COVID-19 Outweighs Demand Outlook
Oil prices slipped on Friday after touching their highest in six weeks as concerns of wider lockdowns in India and Brazil to curb the COVID-19 pandemic offset a bullish outlook on summer fuel demand and economic recovery.
Brent crude fell 26 cents, or 0.4 per cent, to $68.30 a barrel by 0041 GMT, the last day’s trading for the front-month June contract.
U.S. West Texas Intermediate crude for June was at $64.73 a barrel, down 28 cents, or 0.4 per cent
Analyst said Brent is on track to rise roughly 8 per cent in April while WTI could see gains of nearly 10 per cent. The increases in April will be the fifth monthly gains in six months as global demand has almost returned to pre-pandemic levels on the back of fiscal stimulus while production cuts from OPEC and their allies, including Russia, eased crude oil oversupply.
Major American cities are moving to reopen fully. Travelling across China over an extended holiday that starts Saturday is expected to hit a record, and sales of transport fuels in the U.K. are rising. Big oil companies are also starting to reap the rewards of the recovery.
However, the coronavirus is still looming over the market, with a resurgence in regions such as India and Brazil clouding the near-term outlook. OPEC+ warned earlier in the week that the flare-up could even derail the recovery.
“This week saw an avalanche of strong data and reassuring developments in the U.S, but that may have buried the rising global risk of more transmissible Covid variants, particularly the one that has wreaked havoc in India. At six-week highs, crude was ripe for a breather.” Vandana Hari, founder of energy consultant Vanda Insights in Singapore
There’s been a raft of hopeful calls on the outlook this week, with the OPEC+ coalition raising its consumption estimates for this year. Goldman Sachs Group Inc. predicted oil demand will post a record jump as vaccination rates increase. While some regions tackle a virus resurgence, the market is also facing additional supply next month as OPEC and its allies boost output.
On Friday, a private sector survey showed that Japan’s factory activity expanded in April at the fastest pace since early 2018 on a global demand recovery. However, new coronavirus curbs cast a shadow over the overall economic outlook.