(Bloomberg) — Oil is heading for the biggest weekly gain since early March on optimism the recovery in demand from the Covid-19 pandemic is improving.
Futures in New York rose on Friday and are up more than 7% this week. China’s economy soared in the first quarter, while industrial output and crude refining climbed in March from a year earlier. The rebound in the U.S. is accelerating, with data the past couple of days showing jobless claims falling to a new pandemic-era low, and retail sales and gasoline demand expanding.
Bullish data from the world’s top two economies came after the International Energy Agency and the Organization of Petroleum Exporting Countries gave positive outlooks for the global oil market earlier in the week.
The positive momentum has helped oil break out of a narrow range around $60 a barrel, where prices were had been stuck since mid-March. The market may see a temporary lull due to new virus outbreaks, according to the the IEA, but the agency followed OPEC in boosting its full-year estimates for consumption.
The global recovery from the pandemic is uneven, however. While rebounds are gathering pace in the U.S. and China, other nations are grappling with sharp rises in cases. In India, refineries are diverting oxygen produced at their plants to hospitals to help battle a serious second wave, which has led to fuel sales tumbling during the first half of April compared with a month earlier.
“We are going to have period of two steps forward, one step back in the oil market,” said Stephen Innes, chief global market strategist at Axi. “There’s a huge summer driving season coming up in the U.S., but then we have headlines of 200,000 people getting Covid in India in a day.”
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The market is also facing an increase in supply in the coming months, although OPEC said this week that rising demand should trim global stockpiles, while the IEA said the lingering glut was clearing. The OPEC+ alliance is scheduled to start adding more barrels from May.
China’s refineries processed 14.14 million barrels a day in March, almost 20% more than a year earlier, when swathes of the nation locked down to combat the Covid-19 virus. That performance contributed to record economic growth in first quarter and it’s also comfortably ahead of the figure for March 2019, before the pandemic hit.
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