Oil futures shifted higher Monday, buoyed by signs of a brighter global demand outlook, even as India, the world’s third-largest oil consumer, continues to suffer from record daily COVID-19 cases.
“The latest data continues to show Indian demand for refined fuels like gasoline and distillates erasing virtually all of their recovery from the impact of COVID-19,” said Robbie Fraser, global research and analytics manager at Schneider Electric. “As the world’s third-largest importer of crude, India’s efforts to slow what has become the most widespread outbreak of COVID-19 this year will carry major implications for both crude markets and the economy at large.”
While the U.S. continues to lead the world in cases and deaths by wide margins, with 32.4 million cases and 577,045 deaths, India is second to the U.S. by cases at 19.9 million after recording 368,147 new cases on Monday and 3,417 deaths, according to the Associated Press. Over the weekend, India counted more than 400,000 news cases in a single day to set a fresh global record.
“This is not only jeopardizing the recovery of demand in this third-largest oil consuming country, but is also making the demand risks clear to market participants,” said Eugen Weinberg, analyst at Commerzbank, in a note.
Despite headwinds for oil, however, “the market continues to show signs of strength, and confidence that global demand can continue to press higher,” said Fraser, in a daily note.
That’s indicated in part by a continued effort by the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, to “start bringing some production cuts back to the global market,” he said.
West Texas Intermediate crude for June delivery
the global benchmark, was up 68 cents, or 1%, at $67.44 a barrel on ICE Futures Europe.
On Monday, Bloomberg reported that Ihsan Abdul Jabbar, Iraq’s oil minister, told reporters that OPEC+ will continue to trying to keep crude prices “within normal averages” and there “there is no concern about a drop in prices.”
“The comments suggest OPEC+ remains confident about the outlook for energy demand, despite the surge in coronavirus cases in India,” said Phil Flynn, senior market analyst at The Price Futures Group.
Meanwhile, traders are also keeping close watch on Iran, which appears to believe it will soon be able to reach an agreement with the U.S. to lift renewed sanctions and has already boosted production and exports, “particularly to China, which does not care about the U.S. sanctions much,” Weinberg wrote.
White House officials on Sunday denied Iranian state media reports that the U.S. had reached a deal to end economic sanctions and that substantial negotiations loomed ahead, news reports said.
The U.S. also immediately denied a report by Iranian state-run television that deals had been reached for the Islamic Republic to release U.S. and British prisoners in exchange for Tehran receiving billions of dollars. The Associated Press said it wasn’t immediately clear if the report represented a move by the hard-liners running the Iranian broadcaster to disrupt negotiations over the nuclear deal.
“If Iranian oil exports, which the country’s vice president estimates at 2.5 million barrels per day, were to return to the market, this would likely put pressure on oil prices,” Weinberg said.
For now, however, Iran, which is exempt from the OPEC+ production agreement, “has no clear path around U.S. sanctions for at least the near-term, said Schneider Electric’s Fraser.
June natural gas
traded at $2.97 per million British thermal units, up 1.3%.