Oil up as OPEC raises 2021 demand growth forecast on hope pandemic wanes

Oil rose with OPEC boosting its expectation for this year’s demand recovery even as the pandemic continues to surge in many parts of the world.

Futures rose 1% in New York, trading just above $60 a barrel, a level around which they have gyrated for almost four weeks. OPEC raised its forecast for oil consumption by 190,000 barrels a day for 2021, though lowered its outlook for the second quarter.

Pockets of higher oil consumption are emerging worldwide as vaccinations climb. In the U.S., government figures showed miles traveled on highways over the Easter holiday period were the highest since March 2020. Inflation data showed the biggest increase since 2012 as signs of an economic rebound grow.

The market has failed to shake off near-term demand concerns because of the resurgence of the virus. A flare-up of Covid-19 cases is leading to renewed restrictions in countries like India, where streets are emptying again as the nation tackles a new wave of infections. U.S. health officials called for an immediate pause in use of Johnson & Johnson’s single-dose Covid-19 vaccine over blood clot concerns.

“Prices may be gaining today, but there is still a plethora of short-term hesitancy over Covid-19 breakouts and vaccine progress,” said Louise Dickson, analyst at Rystad Energy AS. Still, the market “will eventually give into long-term hope of vaccine campaigns doing their job and some economies returning to normal toward summer.”

The Organization of Petroleum Exporting Countries expects the demand recovery to be strong enough to absorb the halted output the group and its allies plan to return over th next three months. Rising consumption will continue to erode stockpiles.