Oil notches second weekly gain despite India virus surge

[NEW YORK] Oil edged up slightly on Friday even as the Covid-19 crisis in India worsened, and prices notched a second weekly gain against the backdrop of optimism over a global economic recovery.

Brent crude futures ended the session at US$68.28 a barrel while US West Texas Intermediate (WTI) crude settled at US$64.90 a barrel, both up 19 cents, or 0.3 per cent.

The two benchmarks rose by more than 1 per cent on the week, their second consecutive weekly gain, as easing Covid-19 restrictions on movement in the United States and Europe, recovering factory operations and coronavirus vaccinations pave the way for a revival in fuel demand.

"Oil prices might still have a positive second consecutive week, but it is nothing to get energy traders excited that oil will break away from its tightening trading range. Oil's short-term outlook remains very mixed," Edward Moya, senior market analyst at Oanda said.

In China, data showed export growth accelerated unexpectedly in April while a private survey pointed to strong expansion in service sector activity.

However, crude imports by the world's biggest buyer fell 0.2 per cent in April from a year earlier to 40.36 million tonnes, or 9.82 million barrels per day, the lowest since December.

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The recovery in oil demand, however, has been uneven as surging Covid-19 cases in India reduce fuel consumption in the world's third-largest oil importer and consumer.

India on Friday reported a record daily rise in coronavirus cases of 414,188, while deaths from Covid-19 swelled by 3,915, according to health ministry data.

"Brent came within a whisker of breaking past US$70 a barrel this week but failed at the final hurdle as demand uncertainty dragged on prices," said Stephen Brennock at oil brokerage PVM.

The resurgence of Covid-19 in countries such as India, Japan and Thailand is hindering petrol demand recovery, energy consultancy FGE said in a client note, though some of the lost demand has been offset by countries such as China, where recent Labour Day holiday travel surpassed 2019 levels.

"Petrol demand in the US and parts of Europe is faring relatively well," FGE said.

"Further out, we could see demand pick up as lockdowns are eased and pent-up demand is released during the summer driving season."

In the United States, job growth unexpectedly slowed in April, likely restrained by worker shortages that have left businesses scrambling to meet booming demand as the economy reopens.

The US oil and gas rig count, an early indicator of future output, rose eight to 448 this week, its highest since April 2020, energy services firm Baker Hughes said. Since hitting a record low in August, the number of drilling rigs have been growing modestly along with the recovery in oil prices.

REUTERS