Oil Steady Near $65 as Investors Weigh Near-Term Demand Outlook

Futures in New York traded near $65 a barrel while Brent was just under $69 in London. Chinese refiners have churned through record volumes of crude so far this year, but Indian fuel demand continued to weaken in the first half of May. It underscores the uneven rebound that has slowed crude’s rally.

The U.S. and China, along with parts of Europe, are recovering strongly from the pandemic as vaccinations accelerate. Brent’s nearest monthly contract’s premium over the next has started widening again in a bullish backwardation structure, signaling a tightening market.

Still, renewed demand concerns are emerging in Asia, where the coronavirus in India is crippling the nation, while Singapore and Taiwan grapple with new outbreaks. Another wildcard is the prospect of more crude flows from Iran as the nation seeks to revive a nuclear deal and free itself of U.S. sanctions. Talks are ongoing, however, and progress on a solution remains uncertain.

“Overall positive sentiment in commodity markets seems to counter any negative from the progress in nuclear talks,” said Jens Pedersen, senior analyst at Danske Bank. “There are some important local stories to follow. India’s oil demand has dropped on the back of lockdowns.”

There were some reasons for physical markets to be tentatively optimistic. Last week India’s biggest refiner was looking to buy crude for the first time in a month. Meanwhile a unit of a giant Chinese refiner issued a purchase tender on Monday.