Oil prices rose early on Thursday to their highest level in six weeks as a brighter outlook on the American economy and oil demand offset bearish demand prospects from the COVID crisis in India.
As of 11:03 a.m. EDT on Thursday, WTI Crude was up 1.50 percent at $64.87, after touching $65 earlier in the day, and Brent Crude prices had risen 1.61 percent to cross the $68 a barrel mark, at $68.41.
A weaker U.S. dollar today also added fuel to the oil rally this week, which had accelerated on Wednesday when the EIA reported a small inventory build of 100,000 barrels for the week to April 23 and an average gasoline production of 9.6 million bpd, up from 9.4 million bpd in the previous week. In middle distillates, the EIA estimated an inventory draw of 3.3 million barrels for the week to April 23. U.S. refinery utilization rates also rose last week, to 85.4 percent from 85.0 percent in the previous reporting week, as per EIA data.
The oil market saw another bullish factor for oil demand in the Federal Reserve’s statement from Wednesday that the U.S. economy is accelerating.
“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the Fed said in its FOMC statement, adding that it would continue with its easy monetary policy to support the economy and the flow of credit to U.S. households and businesses.
The signs of strengthening the U.S. economy and oil demand trumped on Thursday concerns about the health crisis in India, which could offset some of the demand rebound elsewhere.
Rystad Energy warned on Wednesday that the COVID crisis in India could disturb the nearly balanced global oil market, which could see a surplus of oil supply of as much as 1.4 million barrels per day (bpd) in May amid a sizeable loss of demand from the world’s third-largest oil importer.
Goldman Sachs, however, continues to believe that the market will take India’s crisis in its stride and will realize the biggest jump ever over the next six months.
By Tsvetana Paraskova for Oilprice.com
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