Strong Demand Signs Boost Oil Prices Despite India's Covid Woes

From the EU to the U.S., a strong summer demand rebound is highly anticipated: File Image/Pixabay

Even though oil eked out modest price gains on Thursday due to reports of budgetary issues causing Libya's output to fall by 1 million barrels per day (bod), the market was said to be bearish due to India reporting the world's highest daily increase of new Covid cases.

Bjornar Tonhaugen, head of oil markets at Rystad Energy, noted that "The market realized that a global come-back in oil demand cannot come without a come-back of the world's largest economies."

Hence, Brent edged up 8 cents to settle at $65.40 per barrel, while West Texas Intermediate rose 8 cents to end at $61.43.

So far, the impact of India's slide into Covid chaos is minimal: Indian Oil Corp Ltd's  refineries are operating at about 95 percent of their capacity, down from 100 percent at the same time last month, according to sources.

As for the European Union, previously the focus of media attention due to its botched vaccination program, the European Central Bank kept copious stimulus flowing while predicting a rebound in the economy in the coming months as pandemic restrictions are lifted (the third wave of the pandemic in France was declared by prime minister Jean Castex on Thursday "to be behind us," and the EU is relaxing social distancing and mask mandates for those who are vaccinated).

France will lift curbs on regional movement and reopen schools in the coming weeks, and Greece will ease most lockdown measures in May before welcoming back tourists.

Meanwhile in the U.S., refining margins have significantly improved with gasoline demand at 93 percent of pre-pandemic levels and diesel fully recovered, according to Joe Gorder, CEO of Valero Energy Corp.

Gary Simmons, Valero's chief commercial officer, added, "We're pretty bullish on gasoline going forward."

It's worth noting that California, widely criticised for its draconian lockdown measures, plans to fully reopen the economy on June 15, has increased its pace of oil imports, and raised refinery run rates in advance of an expected summer rebound.

And in the U.K., where herd immunity is said to have been achieved, government data shows average road fuel sales last Friday topped pre-pandemic levels for the first time since September.