Oil slipped below $69 a barrel as traders assessed an uneven recovery in global demand.
Global benchmark Brent has struggled for momentum after failing to break above $70 a barrel on Wednesday. While major crude importer India is battling a record coronavirus wave that’s sapped economic activity, there are signs of rising oil consumption in the U.S., Europe and China. Data Wednesday showed American stockpiles declined last week to the lowest since February.
Oil has rallied in 2021 as key economies including the U.S. and China rebound from the impact of the pandemic, fanning energy demand. The strength in crude forms part of a broad advance in raw materials, with the Bloomberg Commodity Spot Index surging to the highest level in almost a decade. Still, the outbreak in India has rapidly worsened since the start of April, and the country is now reporting more than 350,000 cases every day.
“Prices flirt with the 70 mark, but fail to push higher,” said Hans van Cleef, senior energy economist at ABN Amro. “From a fundamental perspective we have demand uncertainties and a lot of OPEC+ spare capacity to meet any rise in demand.”
Elsewhere in Asia, Tokyo wants to extend a virus emergency currently in place and will seek approval from Prime Minister Yoshihide Suga, in a bid to stem a surge in infections ahead of the capital hosting the Olympics from July.
Prices have also run into technical hurdles in recent days, trading above their upper Bollinger bands intraday, before subsequently retreating. That could prove to be a sign that the current rally may be due for a pause.
“The failure of Brent to break above $70 per barrel highlights that there is still plenty of concern over the demand outlook,” said Warren Patterson, head of commodities strategy at ING Group. “India is a worry for the market, particularly if we eventually see a national lockdown.”