Oil prices fell early hours of Thursday but stayed within range because of bullish investor sentiments on the upcoming summer season in the United States, reduced COVID-19 concerns, and Europe offsetting concerns about decreased demand from India.
Brent crude is trading $68.16 a barrel, currently down 0.83%, erasing Wednesday’s gain. Brent has traded between $68 and $69 for most of this week.
U.S. West Texas Intermediate (WTI) is trading $65.66 a barrel, currently down 0.83% but still within the week’s $65 to $66 range.
Sunilkumar Katke, head of currencies and commodities at Axis Securities stated, “Most of the eurozone countries’ travel restrictions are lifted considering lower COVID-19 cases boosting demand.
However, the rise in cases across many Asian countries including India and the tighter lockdowns have capped a price rally.
Iranian oil entering in the international crude market may take some more time and hence the prices are still holding firm in the short term.”
What this means
Investors in the commodity market will now focus on the Iranian nuclear talks and whether sanctions on its oil exports will be lifted in full, and when it will happen. This may be a big topic of discussion at the next meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC+) on June 1, 2021. Members will have to assess whether to change their plans for easing production with consideration of Iranian supply returning to the market.
Citi Bank predicted OPEC+ would stick to plans to bring back 700,000 barrels per day (BPD) of oil supply in June, but the group’s plan to step up supply by a further 840,000 BPD in July “might now be in question.”
Analysts from JP Morgan say any increase of supply from Iran would only be gradual, with the firm estimating Iran could add 500,000 BPD by the end of this year and a further 500,000 BPD by August 2022.
While the market was supported on Wednesday by drawdowns in U.S. oil inventories, there are still concerns about demand shrinking in India, the world’s third-largest oil consumer, due to the spike in COVID-19 cases in the country. Vivek Dhar, commodities analyst at Commonwealth Bank said, “However, we don’t think demand concerns in India will derail the narrative of global oil demand recovering.”