Crude Oil prices rose on Thursday, on track to hit six-week highs as strong U.S. economic data, a weak dollar and an expected recovery in demand outweighed concerns about rising output and the impact of higher COVID-19 cases in Brazil and India. Brent futures rose 71 cents, or 1.1%, to $67.98 a barrel. U.S. West Texas Intermediate crude rose 56 cents, or 0.9%, to $64.42. Both benchmarks were up for a third straight day.
“Summer season is a synonym for driving season and drivers in the United States, China and the United Kingdom are about to start consuming more fuel, a development the market believes will make up for India’s Covid-19 downturn,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
He added that oil prices drew additional support from a weak dollar, which made “oil cheaper to buy internationally.” The greenback hovered near nine-week lows, under pressure from a dovish outlook from the Federal Reserve and bold spending plans from President Joe Biden. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, stuck to its plans this week for a gradual easing of oil production curbs from May to July.
OPEC+, which plans to bring back about 2 million barrels per day (bpd) of production over the next three months, expects global stocks to reach 2.95 billion barrels in July. That would put those stockpiles below the 2015-2019 average. “A closer look at the state of global oil inventories suggests that the market may be closer to the point of rebalancing than what OPEC+ may think,” analysts at Citibank said, adding that the market has absorbed most of the crude inventory overhang. The bank expects vaccination campaigns in North America and Europe to boost oil demand to a record high of 101.5 million bpd over the northern hemisphere summer months, but said rising COVID-19 cases in Brazil and India could hit local demand if stricter lockdowns are reimposed.
“The outbreak in India is holding back oil’s rally,” Howie Lee, an economist at Singapore’s OCBC bank, said. India’s total COVID-19 cases passed 18 million on Thursday. In Europe, major energy companies, including BP, Total SE and Equinor ASA, profited from higher oil prices to report big increases in first-quarter earnings. Investors also focused on a ramp-up in U.S. refinery operating rates and a drawdown in distillates stocks last week, in data released by the Energy Information Administration on Wednesday. U.S. economic growth accelerated in the first quarter, fueled by massive government aid to households and businesses, charting the course for what is expected to be the strongest performance this year in nearly four decades.