India demand worries knock oil prices from six-week highs

Oil prices slipped on Friday, taking a breather after touching their highest in six weeks as concerns of wider lockdowns in India and Brazil to curb the COVID-19 pandemic offset a bullish outlook on summer fuel demand and the economic recovery.

Brent crude was 84 cents, or 1.2 per cent lower, at $67.22 a barrel by 1016 GMT, the last day of trading for the front-month June contract. U.S. West Texas Intermediate crude for June was at $64.04 a barrel, down 97 cents, or 1.4 per cent.

Prices also came under pressure after China’s factory activity growth slowed and missed forecasts in April, although a private sector survey showed that Japan’s factory activity expanded in April at the fastest pace since early 2018.

“The post-COVID-19 demand recovery is still uneven and the surge in Indian cases serves as a timely reminder that any rally to $70 is too premature,” Energy Aspects analysts said in a note.

Such a level is likely to be reached only in the third quarter this year, when demand improves materially and destocking ends, they said.

The world’s third largest oil consumer is in deep crisis, with hospitals and morgues overwhelmed, as the number of COVID-19 cases topped 18 million on Thursday.

The surging infection numbers and renewed mobility-restricting measures have “forced us to revise down Indian gasoline and gasoil demand” estimates for 2021, said JBC Energy’s senior analyst Eugene Lindell.

Brent is on track to gain around 7 per cent in April while WTI could end around 8 per cent higher.