Oil prices fell early on Friday, yet they were still headed for a second consecutive weekly gain, for a first such back-to-back weekly gain in nearly two months.
Bullish demand outlooks thanks to the reopening in the United States and Europe and a large draw in U.S. crude oil inventories have mostly prevailed this week over the concerns about a slowdown in oil demand in the world’s third-largest oil importer, India.
The new records of India’s daily COVID cases tempered on Thursday the rally in oil prices, which came close on Wednesday to hitting $70 per barrel.
In the middle of the week, the market was focused on the reopening in the United States and Europe, and on the biggest draw in U.S. crude oil inventories since January this year. Earlier in the week, Europe had already added fuel to the rally after the European Commission proposed that the European Union (EU) allow entry for non-essential travel for anyone who has received the last dose of an EU-approved vaccine at least two weeks before arrival.
Oil demand and economies in the United States and Europe are expected to rebound strongly, while India will be the main drag on prices in the short term, analysts say. Related: Oil Rises To Seven-Week High On Strong Remand Recovery
“The euphoria over an accelerating US economy and summer reopening plans across the European Union remains in the driver’s seat for the oil complex,” Vanda Insights said in a market commentary on early on Friday.
“Despite rising OPEC+ output, and also accounting for larger Iranian supply, the market is still set to draw down inventories throughout the year. Obviously, during these uncertain times, the biggest downside risk for the market is if oil demand does not recover as quickly as many in the market are anticipating,” ING’s Head of Commodities Strategy, Warren Patterson, said on Thursday.
By Tsvetana Paraskova for Oilprice.com
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