(Bloomberg) — Oil was steady below $67 a barrel as weaker demand from virus-hit India partially offset optimism over the global economic recovery.
Brent crude edged lower after most-active prices rose almost 6% last month. April sales of gasoline in India fell to the lowest since August, while those for diesel were the least since October when factoring in the length of the month, preliminary data from officials with direct knowledge of the matter show. Separately, the president of the Confederation of Indian Industry urged the government to curb economic activity to counter the growing health crisis.
Oil has rallied in 2021 on prospects for a rebound in demand as Covid-19 vaccines are rolled out, paving the way for greater economic activity. However, the recovery has been uneven, with some nations suffering from resurgent waves of the virus. At the same time, the Organization of Petroleum Exporting Countries and its allies started this month to ease the supply curbs they imposed last year to drain bloated global stockpiles and revive prices.
“The biggest factor is still India and how much demand has been hit there,” said Howie Lee, an economist at Oversea-Chinese Banking Corp, adding that recoveries in China and the U.S. are already factored in. “Prices may continue to move in a range. Above $68 is when selling pressure starts to build.”
Traders are tracking efforts to broker a U.S.-Iranian deal to revive a nuclear accord abandoned by the White House in 2018, potentially paving the way for an increase in crude exports from the Persian Gulf nation. U.S. officials said a deal isn’t close, denying an Iranian report on an impending prisoner swap.
Meanwhile, U.S. oil output may continue to struggle as drilling in the shale patch fell for a second straight week. U.S. explorers battered by last year’s crash are showing unprecedented austerity and the rig count is still at half pre-pandemic levels. Also, the Arctic blast that swept through the U.S. South in February caused a much bigger loss in supply than previously estimated.
Brent’s prompt timespread was 46 cents a barrel in backwardation, a bullish pattern where near-term prices trade above those further out. That compares with 62 cents a week ago and 40 cents at the start of April.
Many countries around the world — including China, Japan and the U.K. — are marking national holidays on Monday, which may thin out trading volumes.
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