Oil prices rose to a six-week high amid bullish oil demand and a positive outlook for the US economy, despite fears the recovery demand will be impacted by the resurgence of coronavirus infections in India. A weak dollar, which was pinned near nine-week lows, also lent some support to oil prices.
On the week closing, Brent crude price rose to $67.25 per barrel and West Texas Intermediate (WTI) rose to $63.58 per barrel.
At their latest monthly meeting, OPEC+ producers decided to maintain their existing plans to boost oil output gradually by easing production output cuts but this did not impact oil prices, signaling the group’s confidence in the demand outlook and that they do not see any lasting impact from India’s coronavirus crisis.
This is because market sentiment remains supportive and the cautious approach in the second quarter seems to be fading away. This is mainly supported by the continued drawing of the global oil inventories, and the market has absorbed most of the crude inventory overhang, although refined products inventories are still relatively high.
The growing optimism in US oil demand continues after the ramp-up in US refinery operating rates. Refining activity also picked up, boosting hopes for rising fuel demand.
On the other hand, some Indian refiners struggled to postpone maintenance plans, while other refiners faced delays with restarts as they battled to contain the spread of the coronavirus. Consequently, it is impossible to complete any refinery turnarounds now because of strict lockdown restrictions that prohibit the gathering of large numbers of people, as maintenance requires this but it is currently not permitted.
OPEC+ will closely monitor developments in India, the world’s third-largest oil importer, to see if that might lead to a global oil surplus and disturb the nearly balanced global oil market.
The latest figures from the Commodity Futures Trading Commission on April 27 showed that long positions on crude oil futures on the New York Mercantile Exchange numbered 654,289 contracts, down by 2,521 contracts from the previous week (1,000 barrels for each contract). It is the first increase in positions after five consecutive weeks of declines. This week’s decrease in positions is back sooner than expected after last week’s increase halted five previous weeks of consecutive declines.
• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter: @faisalfaeq