Oil prices slip from six-week high as India demand worries weigh

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Oil prices slipped on Friday, taking a breather after touching their highest in six weeks as concerns of wider lockdowns in India and Brazil to curb the Covid-19 pandemic offset a bullish outlook on summer fuel demand and economic recovery.

Brent crude fell $1.27, or 1.85%, to trade at $67.29 per barrel, the last day’s trading for the front-month June contract. U.S. West Texas Intermediate crude for June was at $63.50 a barrel, down $1.51 or 2.3%.

“The post-COVID-19 demand recovery is still uneven and the surge in Indian cases serves as a timely reminder that any rally to $70 is too premature,” Energy Aspects analysts said in a note.

Such a level is likely to be reached only in the third quarter this year, when demand improves materially and destocking ends, they said.

Brent is on track to gain roughly 8% in April while WTI could see gains of nearly 10%.

The increases will be the fifth monthly gains in six months as global demand has almost returned to pre-pandemic levels on the back of fiscal stimulus and the easing of virus lockdowns in some countries, while production cuts from OPEC and their allies including Russia eased crude oil oversupply.

Wider adoption of Covid-19 vaccinations is also restoring confidence in travel, lifting oil demand.

Several U.S. cities are emerging from lockdown stoking confidence of stronger demand in gasoline ahead of the key U.S. summer driving season, ANZ analysts said, while UK road fuel sales are nearing last summer’s levels.

The upcoming Labour Day holiday in China would also boost fuel demand at the world’s second largest oil consumer.

“This renewed optimism is overshadowing headwinds in India, where a second wave of infections of COVID-19 are resulting in new travel restrictions being put in place,” ANZ said in a note.

The world’s second most populous nation is in deep crisis, with hospitals and morgues overwhelmed, as the number of Covid-19 cases topped 18 million on Thursday.

On Friday, a private sector survey showed that Japan’s factory activity expanded in April at the fastest pace since early 2018 on a global demand recovery though new coronavirus curbs cast a shadow over the overall economic outlook.

China’s factory activity growth, however, slowed more than expected, official data showed.