SINGAPORE (Reuters): 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 economic recovery.
Brent crude fell 70 cents, or 1 percent, to $67.86 a barrel by 10.45 a.m. in London, the last day’s trading for the front-month June contract. US West Texas Intermediate crude for June was at $64.23 a barrel, down 78 cents, or 1.2 percent.
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 roughly 8 percent in April while WTI could see gains of nearly 10 percent for the month.
That would be their fifth monthly gain in six months as global demand has almost returned to pre-pandemic levels on the back of fiscal stimulus and the easing of virus lockdowns in some countries, while production cuts from OPEC and their allies including Russia eased crude oil oversupply.
The COVID-19 vaccine rollout and the lifting of lockdowns in several cities in the United States and Britain are also restoring confidence in travel, lifting fuel demand, ANZ analysts said.
The upcoming Labour Day holiday in China would also boost fuel demand at the world’s second largest oil consumer.
“This renewed optimism is overshadowing headwinds in India, where a second wave of infections of COVID-19 are resulting in new travel restrictions being put in place,” ANZ analysts said in a note.