Oil fluctuates above $60 in run-up to critical OPEC+ gathering
Oil has pulled back in recent weeks as the Covid-19 situation deteriorates in parts of the world ahead of a widely anticipated demand rebound once enough people are vaccinated.
Oil fluctuated ahead of an OPEC+ meeting on Thursday at which the group will decide on output policy, with the alliance expected to maintain its cautious stance on adding supplies given near-term concerns on demand.
West Texas Intermediate rose 0.2% after falling 1.6% on Tuesday. In the run-up to the closely-watched ministerial meeting, an OPEC+ panel revised down demand estimates for the year, delegates said. Still, the group also expects the surplus built up during the pandemic to be mostly gone within the next quarter.
Economic data and forecasts continue to point to a recovery, boding well for oil demand. In Asia, an official gauge of China’s manufacturing rose to 51.9 in March, topping estimates. Next week, the International Monetary Fund will upgrade its forecast for global growth -- driven by better outlooks for the U.S. and China -- while warning of new virus strains that may slow the rebound.
Oil has pulled back in recent weeks as the Covid-19 situation deteriorates in parts of the world ahead of a widely anticipated demand rebound once enough people are vaccinated. Stricter lockdown rules in parts of Europe are showing up in traffic data and fuel use, while in the U.S., data from OPIS by IHS Markit show gasoline sales trailing pre-pandemic levels by 16%. A sustained rise in the dollar has also added a headwind for prices of commodities including crude.
“The rough patch for oil endures as the short-lived bounce from the Suez Canal blockage has given way to a mighty U.S. dollar and the Covid-19 resurgence,” said Stephen Innes, chief global market strategist for Axi. That raises “more questions than answers around how quickly global demand will recover,” he said in an email.
The Organization of Petroleum Exporting Countries and its allies will consider whether to revive part of the 8 million barrels of daily output -- about 8% of global supply -- that they’re withholding. After surprising the market at their last gathering by sticking with production curbs, the group is expected to maintain that stance this week.
The principal advocate of the cautious OPEC+ approach has been Saudi Arabia, one of the group’s two main leaders along with Russia. Energy Minister Prince Abdulaziz bin Salman has made the case that given the risks to consumption still posed by the pandemic a conservative stance is merited. He’s also said higher prices won’t trigger a concerted rise in supply by U.S. shale producers.
Industry data showed a mixed picture of U.S. stockpiles. Crude inventories rose 3.91 million barrels last week but gasoline stockpiles fell 6.01 million barrels, the American Petroleum Institute reported, according to people familiar.
Brent’s prompt timespread was 3 cents in backwardation. While that’s a bullish pattern -- with near-term prices trading above those further out -- it’s down from 16 cents a week ago, and 67 cents at the start of the month.