Oil in New York surged the most in a month on Friday as prices garnered support from a recovery in equities and a softer US dollar.
West Texas Intermediate (WTI) climbed back above US$65 a barrel, eking out a third straight weekly gain as a weakening US dollar boosted appeal for commodities priced in the currency.
Concerns persist over the spread of COVID-19 in Asia, which has tempered further gains.
Progress on reopening economies in countries including the US supports expectations for heavy summer travel, buttressing the market’s underlying structure from recent weakness.
The premium of Brent’s nearest contract against the next month strengthened on Friday to its widest in more than a week. Growth in that structure, which is called backwardation, suggests the market is expecting tighter supplies.
“The economy looks a lot better,” with the US easing its mask mandate “suggesting that we’re going to be close to normal soon,” Strategic Energy & Economic Research president Michael Lynch said. “Any boost that happens with demand will likely be met by restored supply.”
Oil prices have been stuck in a range lately, with optimism around global inventories rebalancing being offset by constant reminders that parts of the world remain far from a full recovery from the COVID-19 pandemic.
WTI crude for June delivery on Friday rose 2.43 percent to US$65.37 a barrel. The contract rose 0.7 percent for the week.
Brent for June delivery on Friday gained 2.48 percent to US$68.71 a barrel, up 0.6 percent weekly.
The International Energy Agency this week said that the global glut that built up last year has cleared.
However, the agency also lowered its demand estimates due to a virus resurgence in India.
“So far, the demand recovery is still fairly uneven,” BCA Research Inc commodity and energy strategist Bob Ryan said. “COVID has not yet been contained. But next year, prices more than likely drift up toward US$70 a barrel, because of the synchronization of the global recovery from the pandemic.”
Meanwhile, gas stations in the US are still in the process of returning to normal following the restart of the Colonial Pipeline. Fuel supply disruptions in parts of the US east and south might still be weeks out from returning to normal after a cyberattack halted the largest fuel pipeline in the US.
Oil demand looks set to continue rising into this summer, with restrictions easing in many of the world’s largest economies.
US President Joe Biden’s administration on Thursday announced that fully vaccinated Americans can ditch masks in most settings.
Elsewhere, Italy is poised to lift quarantine restrictions for arrivals from the EU, the UK and certain other countries starting this weekend.
However, India’s sustained struggle with the latest outbreak is continuing to weigh on markets. Some local ports have declared force majeure due to staffing shortages.
Elsewhere in the region, Singapore is to reimpose curbs, Japan plans to extend restrictions and China saw its first COVID-19 infections in about a month.
Additional reporting by staff writer
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