Oil fell this week with spreading COVID-19 cases in countries such as India tempering optimism around positive signs out of the US and Europe.
West Texas Intermediate for May delivery rose US$0.71 to US$62.14 a barrel, but posted a decline of 1.57 percent for the week as the market weighed a global economic reopening that is coming in fits and starts.
Brent crude for May delivery also increased US$0.71 to US$66.11 a barrel, dropping 0.99 percent from a week earlier.
The US has remained near the forefront of the world’s budding demand recovery from the COVID-19 pandemic, and the latest manufacturing figures out of Europe have stoked optimism around a recovery there.
However, India has been setting record numbers of daily COVID-19 cases, threatening demand in the world’s third-largest oil importer.
Its diesel and gasoline consumption could fall by one-fifth this month, and traders said the nation’s largest refiner had refrained from buying West African oil this week, defying expectations.
“There was a real strong belief that we were going to see a very robust demand outlook from Asia,” Oanda Corp senior market analyst Edward Moya said.
However, with concerns in countries such as India and Japan, Moya said it shows “the global economic recovery is not going to be balanced by any means, and that’s going to derail the international travel situation.”
Oil is up almost 30 percent this year, but prices have struggled to reach new heights recently with the COVID-19 situation deteriorating in some key oil consuming countries.
India’s combined consumption of diesel and gasoline is poised to plunge by as much as 20 percent this month from a month earlier due to renewed restrictions, officials from refiners and fuel retailers have said.
Meanwhile, Japan is facing an increase in cases and a state of emergency has been declared from today to May 11 in prefectures including Tokyo.
“In the short-term, the market is facing an uneven recovery in demand,” Commodity Research Group senior partner Andrew Lebow said. “With concerns around India and Japan, which are two of the top five consumers of petroleum products, the market is trying to gauge where we’re going on demand.”
While India has so far avoided re-entering a nationwide lockdown, the demand impact would be comparable to the one faced during last year’s initial wave were it to do so, Cornerstone Macro analysts Jan Stuart and Thomas Marchetti said in a note.
Still, prices have averted further losses, aided by the rollout of COVID-19 vaccines and vigilant supply management from OPEC and its allies.
OPEC+ is set to start easing deep supply curbs from May, and the group is expected to hold a full ministerial meeting next week to assess the global state of play.
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