Oil Prices Down, But Saudis Insist Output Increases Are Justified By Demand Growth

Still, analysts continue to fret over Covid in Europe: File Image/Pixabay

The overly familiar worries about rising supply and compromised demand recovery due to the Covid lockdowns continued to grip crude traders, and on Friday their fears caused another session of price declines for the commodity.

Brent fell 16 cents to $63.04 per barrel by 1:38 p.m. EDT (1738 GMT), while West Texas Intermediate  was at $59.38, down 22 cents; both benchmarks are on track for a 2 percent-3 percent drop this week, but still far from the low of $60.47 hit two weeks ago.

Jim Ritterbusch, president of Ritterbusch and Associates, remarked, "Favourable oil demand prospects are being largely offset by the expected increase in OPEC + production that could be approximating 2 million barrels per day by the end of July," a reference to the decision of the Organization of the Petroleum Exporting Countries to increase supplies between May and July.

John Kilduff, founding partner at Again Capital, said,"There's real push-pull in the market based on vaccination acceleration, increased production and new lockdowns, which is why we are moving sideways."

For its part, Saudi Arabia said it is confident that OPEC was right to increase production over the next three months, due to signs of improving demand regardless of the pandemic: India's oil-products demand in March rose to the strongest since late 2019, while traffic in the U.S. is roaring back in many cities, an indication of stronger demand this summer.

Still, Gary Cunningham, director at Tradition Energy, warned that "Until we start to see some jet fuel demand come back, Asian demand pick up and European countries ease restrictions," prices may not surge much higher in the near term.

Meanwhile, media focus on rising infections in Europe and its botched vaccination rollout has detracted from remarkable news in other parts of the world, case in point: with 56 percent of citizens vaccinated and other 15 percent recovered, and with infection rates plummeting despite the country lifting restrictions, Israel may have achieved herd immunity.