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April Wrap: Oil Posts April Gain With Focus on Upcoming Demand Revival


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These translations are done via Google Translate
(Bloomberg) Oil rose this month with a slew of positive economic data and signs of a budding fuel consumption revival in key economies offsetting a worsening coronavirus crisis elsewhere.Futures in New York rose this week, extending its monthly gain to 7.5%. The near-certain likelihood of higher fuel consumption in the U.S., China and the U.K has brightened the overall demand outlook, even as a resurgent pandemic in countries such as India, Brazil and Japan cloud those prospects. OPEC and its allies see world consumption rebounding by 6 million barrels a day this year, while Goldman Sachs Group Inc. this week said demand could post a record jump as vaccination rates increase.“The U.S. is going to lead the demand recovery” and “now that Covid cases are declining across most of western Europe, there’s excitement around a strong pickup in global economic activity and improved air travel in the coming months,” said Edward Moya, senior market analyst at Oanda Corp. But “to take out the March highs, the situation in India needs to be heading in the right direction.”

Oil returns to monthly gains after declining in March

Green shoots of a revival in fuel consumption are sprouting around the world. Travel across China is expected to pick up over an extended Labor Day holiday. In the U.S., a string of real-time data pointing to an economic rebound taking hold in the world’s largest oil consumer has stoked optimism around demand in coming months.

Oil’s overall advance is in keeping with a broad-based surge in interest in commodities this week, driven by optimism in key economies and tightening supplies of raw materials. That’s pushed the Bloomberg Spot Commodity Index to the highest level since 2012 in previous sessions.

Prices
  • West Texas Intermediate fell $1.43 to settle at $63.58 a barrel, but rose 2.3% this week
  • Brent for June settlement, which expires Friday, lost $1.31 to $67.25 a barrel. The contract is up 1.7% this week, and climbed 5.8% for the month
    • The more-active July contract declined $1.29 to $66.76

Still, it will likely be a bumpy road ahead for prices as the world’s economies reopen at varying paces. U.S. benchmark crude futures on Friday posted their largest daily loss in almost four weeks, with raw materials and U.S. equities cooling from a scorching rally. Further weighing on prices was a strengthening dollar, which makes commodities priced in the currency less attractive.

A viral onslaught in India is the most notable threat to a worldwide oil recovery. Imports from the South Asian country could fall by over 1 million barrels a day in the coming weeks, if not three times more, consultant Kpler said in a report Friday. The loss of demand is showing up in U.S. physical markets, where sour crude differentials have weakened this week amid lower demand from India.

“People are gradually getting back to their old consumption ways in terms of oil, but there are a lot of things that could upset the apple cart,” said James Bradford, portfolio manager of Vivid Capital Management’s Energy Fund. “We are chewing through the inventory surplus over the five-year average pretty quickly,” but that’s before OPEC+ returns output, Iran further increases production and India imposes “lockdowns of any serious consequence.”

Other oil-market news:
  • Vitol Group is buying Hunt Oil Co.’s Permian Basin business as the biggest independent crude trader makes a major move into the world’s busiest shale patch.
  • PT Pertamina, Indonesia’s state-owned oil and gas company, is weighing an initial public offering of its exploration unit that could be the biggest first-time share sale in Southeast Asia in more than a decade, according to people with knowledge of the matter.
  • Exxon Mobil Corp. and Chevron Corp. generated the most free cash flow in more than a year as economies around the world claw their way out of lockdowns, boosting energy demand.
  • Oil drilling in the shale patch declined for a second straight week in what may be a harbinger for things to come as U.S. oil explorers battered by last year’s market crash show unprecedented austerity.


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