Oil rose the most in over a week alongside a broader market rally after positive economic data from the U.S. and Europe allayed some of the concerns around a rampant Covid-19 resurgence in countries such as India.
Futures climbed as much as 1.6% in New York after flipping between small gains and losses earlier in the session. A composite gauge of output at U.S. manufacturers and service providers reached a record high in April, while the latest data showed robust manufacturing figures in Europe. The dollar weakened, boosting the appeal of commodities priced in the currency, while strengthening U.S. equities helped support prices.
Still, oil is headed for a weekly loss as India continues to set a record number of daily cases. The country’s diesel and gasoline consumption could fall by a fifth this month, and traders said the nation’s largest refiner had refrained from buying West African oil this week, defying expectations.
“The market is facing dueling inputs,” said John Kilduff, a partner at Again Capital LLC. Economic data out of the U.S. and Europe “was terrific, boding well for the reopening outlook. The bad news is India.”
Oil has climbed more than 25% this year, aided by the rollout of Covid-19 vaccines and vigilant supply management from the Organization of Petroleum Exporting Countries and its allies. But the bulk of crude’s advance came in the first two months of the year, and prices have struggled since. OPEC+ is set to start easing deep supply curbs from May, and the group is expected to hold a full ministerial meeting next week to assess the global state of play.
“A rampant outbreak in India is raising fears of a delayed recovery for fuel demand,” TD Securities commodity strategists led by Bart Melek said in a note. “But strong reflationary signals, a weaker dollar, and a powerful recovery in U.S. energy demand are all offering support.”
WTI for June delivery rose 71 cents to $62.14 a barrel as of 10:44 a.m. in New York
Brent for the same month gained 63 cents to $66.03 a barrel
As India’s outbreak worsens, the nation’s combined consumption of diesel and gasoline is poised to plunge by as much as 20% in April from a month earlier due to renewed restrictions, according to officials from refiners and fuel retailers. Meanwhile, Japan is facing an increase in cases and a state of emergency will be declared from Sunday to May 11 in cities including Tokyo.
There is also concern about the potential for a rise in cases around Ramadan, when millions of people typically head home to regional towns from urban centers. Southeast Asia’s biggest predominantly Muslim nations, Indonesia and Malaysia, will limit travel toward the end of the monthlong fasting period.