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.
As of 9:51 a.m. EDT on Friday, WTI Crude prices were down 0.28 percent at $64.53 and Brent Crude was trading down 0.29 percent at $67.89.
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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We shouldn’t exaggerate the impact of India’s crisis on global oil demand. While India is the world’s third largest crude oil importer after China and the United States importing 4.0 million barrels a day (mbd), its oil demand might have recently declined by no more than 10% at most or 400,000 barrels a day (b/d). This is too small a volume to retard the powerful bullish influences prevailing currently in the market.
OPEC+’s decision to go ahead with easing the production cuts between May and July despite the COVID crisis in India, signs of growth in the US economy, a wider opening of the EU’s economies and China’s insatiable demand for oil are underpinning global oil demand and prices and promoting confidence in the global economy. These factors far outweigh any loss of Indian demand triggered by the COVID crisis.
The surging price of copper could be signalling the advent of a ‘supercycle’ defined as a prolonged rise in the prices of commodities including crude oil. It could also be a harbinger for an imminent huge leap in oil prices. There is even a risk copper could more than quadruple in value, taking oil prices into triple digits.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London