India demand fears, weak Japan crude imports knock oil prices 2%

[NEW YORK] Oil prices were down 2 per cent on Friday, falling from six-week highs as investors unloaded positions after weak Japanese crude import data and on worries about fuel demand in India, where Covid-19 infections have soared.

US crude and global benchmark Brent were set for their biggest daily drops in about three weeks, but were still on track for monthly gains of about 8 per cent and 6 per cent, respectively. Fuel demand worldwide is mixed but consumption is rising in the United States and China.

Brent crude fell by US$1.30, or 1.9 per cent, at US$67.26 a barrel by 12.48pm EDT (1648 GMT), the last day of trading for the front-month June contract. US West Texas Intermediate crude for June was at US$63.67 a barrel, down US$1.34, or 2.1 per cent.

"The tug of war between summer demand growth prospects and worsening Covid infections is still in full swing," JBC Energy analysts wrote on Friday.

India, 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.

Japan's - another major crude oil importer - imports fell 25 per cent in March from a year earlier to 2.34 million barrels per day, according to government figures. However, the country's factory activity expanded at the fastest pace since early 2018.

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"There are still several major countries struggling mightily with the Covid-19 and of course there is a humanitarian crisis developing in India," said John Kilduff, partner at Again Capital. "These are two big sources of demand that are taking a hit." Opec oil output rose in April due to more supply from Iran, countering the cartel's pact with allies to reduce supply.

A Reuters survey forecast that Brent would average US$64.17 in 2021, up from last month's consensus of US$63.12 per barrel and the US$62.3 average for the benchmark so far this year.

REUTERS