Oil posted the biggest weekly gain since early last month as signs emerged of a recovery from the COVID-19 pandemic gaining traction in the US and China.
Futures in New York advanced 6.4 percent this week, despite eking out a small loss on Friday.
On the heels of robust economic figures out of the US, data from China showed that its GDP climbed 18.3 percent in the first quarter of this year from a year prior as consumer spending beat forecasts.
Last month, China’s refiners processed about 20 percent more crude than a year earlier, pointing to the strength of the country’s rebound.
JPMorgan Chase & Co analysts brought forward their forecast for the global benchmark Brent hitting US$70 a barrel again by four months to next month, with a boost in US demand likely bringing inventories for countries of the Organisation for Economic Co-operation and Development in line sooner than expected.
West Texas Intermediate for May delivery on Friday fell US$0.33 to settle at US$63.13, up 6.4 percent for the week.
Brent crude for May delivery on Friday fell US$0.17 to US$66.77, up 6 percent weekly.
“The world’s two largest economies are starting to really shine, and despite difficulties in Europe, they’re starting to get vaccinations going as well,” Oanda Corp senior market analyst Edward Moya said. “Having Europe, China and the US for the most part looking at a return to normalcy, that speaks wonders for the demand outlook, which is very supportive for higher prices.”
Prices this week escaped the narrow trading range they had been in for nearly a month, with upbeat developments out of the world’s two largest economies helping lift the outlook for demand.
The International Energy Agency joined the world’s major oil organizations in boosting its consumption forecasts earlier this week, with the agency citing the improving situation in US and China.
In Asia, a Chinese mega-refiner and some Japanese oil companies have been snapping up crude cargoes, boding well for the physical market.
With Asian buying picking up, gauges of market strength have also climbed. Brent’s nearest timespread was in a bullish backwardation of US$0.48 a barrel on Friday, compared with as little as US$0.37 on Wednesday.
“We’re closing the gap on gasoline and jet fuel,” Third Bridge Group Ltd global head for industrials, materials and energy Peter McNally said. “International travel is not coming back this summer, but as far as the two biggest markets go — China and the US — it’s encouraging,” he said.
Commodities faced a broad-based surge this week, with oil and metals both topping key technical levels alongside a weaker US dollar and lower US Treasury yields.
The 23-member Bloomberg Commodity Spot Index broke out to the highest since late February after hedge funds trimmed their net bullish positions for six straight weeks.
The oil market is facing an increase in supply in the coming months, although OPEC said this week that rising demand should allow for global stockpiles to deplete.
Exports of Russia’s flagship Urals crude are set to rise sharply in the first five days of next month, a move that pressured swap markets tied to the grade.
Complicating the picture, talks are continuing between Iran and world powers over the revival of a 2015 nuclear agreement, a return to which could see the US lift sanctions on the Persian Gulf nation’s oil exports.
Still, progress on the talks has been uncertain in the past few days.
Despite strong recovery signals from China and the US, COVID-19 continues to slow growth elsewhere. In India, refineries are diverting oxygen produced at their plants to hospitals to help battle a serious second wave, which has led to fuel sales tumbling during the first half of this month, compared with a month earlier.
Additional reporting by staff writer
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