Oil clawed back losses after an OPEC+ panel boosted its global demand growth view, while the worsening Covid-19 crisis in India held back prices from further gains.
Futures in New York were little changed following a rebound from a loss of as much as 2.4 per cent earlier Monday. An OPEC+ technical committee was said to raise its global oil demand growth forecast for 2021 to 6 million barrels a day, according to delegates. Earlier, OPEC Secretary-General Mohammad Barkindo said that the group sees “positive signals” in the global economy, but that there are factors in the oil market that require ongoing vigilance.
The psychological impact of the higher forecast “is making people a little more optimistic about oil demand,” said Michael Lynch, president of Strategic Energy & Economic Research. “We’re seeing serious progress toward getting people vaccinated and opening up the economy,” especially in the U.S.
The OPEC+ panel’s global demand growth estimate for 2021 is up from its projection last month, though in line with OPEC’s April monthly report. The committee sees global oil inventories declining by 1.2 million barrels a day this year on average.
Still, emerging signs of strain on India’s refiners continue to weigh on prices. Indian Oil Corp. is looking to sell gasoline into the spot market, a potential indication of weak domestic demand. Meanwhile, the country’s refiners are being forced to postpone planned shutdowns for maintenance at some plants as workers are either fleeing or falling ill amid the pandemic’s rampant resurgence there.
The deteriorating situation there could pose a problem for the Organization of Petroleum Exporting Countries and its allies, which have agreed to start adding more supply from May. The OPEC+ Joint Technical Committee’s report warned that the Covid-19 surge in India and Brazil may “derail” the oil demand recovery.
“Global demand is seeing a setback, with countries like India going into full-scale chaos,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago. “It’s got people more cautious as far as travel.”
The road to a full-blown global recovery from the pandemic could still be some ways out. While demand is improving, the recovery is so far not racing ahead, market data examined by Morgan Stanley analysts Martijn Rats and Amy Sergeant show. The figures point to an uneven recovery, with weaker data in Europe, India and Brazil, they wrote in a note.
Some crude traders have expressed concern about potentially diminishing demand for U.S. sweet crudes amid India’s virus surge, such as Permian grades which form the bulk of America’s oil exports. However, prices for those grades so far haven’t declined in response, with a wider WTI discount to Brent possibly garnering demand from other destinations in Asia where the pandemic has been brought under control. The South Asian country was the second largest buyer of American oil, according to the most recent U.S. Census Bureau data.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU