Oil futures ended lower Thursday, with U.S. prices down a second session, as investors weighed disappointing data on U.S. gasoline usage and kept an eye on the impact of surging COVID-19 infections in India on oil demand.
“The situation in India is still providing a major drag for oil prices,” said Edward Moya, senior market analyst at Oanda, in a market update.
In India, the world’s third-largest oil importer, the number of new confirmed cases on Thursday exceeded 400,000 for the second time since the surge began last month. The 412,262 cases pushed India’s tally to more than 21 million. The Health Ministry also reported 3,980 deaths in the last 24 hours, bringing the country’s total to 230,168. Experts believe the number of cases and deaths in India have both been undercounted.
“With the supply side remaining supportive of higher prices, oil just needs to consolidate for a month for India and Japan to get a better handle on COVID,” said Oanda. U.S. benchmark oil prices could rally 10% to 15% “once India’s COVID crisis improves.”
“The rest of the world is growing nervous that a prolonged crisis in India could trigger new variants and keep this global pandemic lasting much longer,” said Moya, but support from the European Union and U.S. “will intensify as India is roughly 18% of the world’s population.”
West Texas Intermediate crude for June delivery
the global benchmark, lost 87 cents, or 1.3%, to settle at $68.09 a barrel on ICE Futures Europe.
The Energy Information Administration on Wednesday reported a much-larger-than-expected drop in crude inventories of 8 million barrels. But oil prices struggled after the release of the data, which also showed gasoline supplies unexpectedly rose by 700,000 barrels.
Weakness was also seen after the EIA data showed finished motor gasoline supplied, the EIA’s demand indicator, fell by 12,000 barrels to 8.864 million barrels, said Robert Yawger, director of energy futures at Mizuho Securities, in a note.
“Many analysts are looking for demand to increase as the economy starts to open up…that did not happen for the second week in a row,” he wrote.
Gasoline had been leading the rally in the energy complex and will need to find its footing “for the market to supersize the upside in coming weeks,” he said.
Gasoline futures gave up gains to end near unchanged Wednesday. On Thursday, the June contract
fell nearly 1.8% to $2.11 a gallon and June heating oil
fell almost 0.7% to $1.99 a gallon.
Still, Robbie Fraser, global research & analytics manager at Schneider Electric, pointed out that U.S. refineries have “moved above their five-year average run rates for the first time during the COVID-era, after emerging from a very limited maintenance reason.” That may be “promising” for crude longer term, he said in a note.
“Refinery utilization rates typically peak during the Northern Hemisphere summer as travel demand for products like jet fuel and gasoline picks up,” said Fraser.
Oil had climbed Wednesday ahead of the EIA data, buoyed by optimism over U.S. fuel demand and the prospect of easing restrictions in Europe.
Meanwhile, news reports said Saudi Arabia lowered its official selling price for crude to Asia and Europe, a move that may have been partly in response to the continued rise in cases in India, wrote analysts at Commerzbank, in a Thursday note.
“The official selling prices (OSP) for U.S. customers have risen to their highest level since November,” they said. “Saudi Arabia clearly envisages different prospects for these markets, in other words.”
Back on Nymex, prices for natural gas made only modest moves after the EIA on Thursday said that domestic supplies of natural gas rose by 60 billion cubic feet for the week ended April 30. On average, analysts forecast an increase of 51 billion cubic feet, according to a poll conducted by S&P Global Platts.
June natural gas
settled at $2.93 million British thermal units, down 0.3%.