Surging Demand Globally Boosts Oil Prices, But India Remains A Concern

by Ship & Bunker News Team
Monday May 3, 2021

Strong economic numbers from China along with ongoing Covid vaccination success in the U.S. once more trumped worries about rising infection rates in India, and the resulting bullish sentiment about demand recovery caused oil prices on Monday to rise by over 1 percent.

After it was reported that about a third of U.S. residents have been fully vaccinated and that Chinese crude imports averaged a seasonal record in February and March from increased car sales and local travel (according to BofA Global Research), Brent rose 80 cents, or 1.2 percent, to settle at $67.56 per barrel.

West Texas Intermediate rose 91 cents, or 1.4 percent, to settle at $64.49 per barrel.

BofA Global stated in a report, “Even as COVID-19 cases hit record levels this week, oil prices have moved higher on growing vaccination numbers in developed markets; recent data points to the high effectiveness of vaccines at preventing infections and fatalities.”

Still, India reporting over 300,000 new coronavirus cases for a 12th straight day on Monday remained the source of concern for analysts: Louise Dickson, analyst at Rystad Energy, said, “India jitters are currently stopping oil prices from rising further.”

It was also reported that the Organization of the Petroleum Exporting Countries' (OPEC) share of India’s oil imports fell to the lowest in at least two decades in the year to the end of March, as  purchases in that country fell to a six-year low: total crude imports fell to 3.97 million barrels per day (bpd) in the 2021 fiscal year to March 31, down 11.8 percent from a year earlier.

India bought more oil from the U.S. and Canada than from OPEC members in Africa and the Middle East, reducing purchases from OPEC to around 2.86 million bpd.

Meanwhile, although energy stocks ended April as the month's worst-performing sector, it is nevertheless the top-performing sector for 2021, up nearly 30 percent - and this prompted Craig Johnson, senior technical research analyst at Piper Sandler, to remark, “I think the charts are telling us a very bullish message at this point in time.”

Another positive development on Monday occurred when oil, the most heavily weighted of all commodities, climbed in response to the European Union proposing the easing of travel restrictions, a move that could further boost a rebound in fuel demand globally.

Bloomberg reported that "Prices for everything from copper to oil to timber have sky-rocketed as the world’s largest economies recovers from the pandemic, with growing signs of shortages across markets.

"Manufacturing and building are picking up, cars are filling the streets again and more people are booking airline tickets as they get vaccinated at a time when supplies are curbed by bottlenecks, production curbs and poor weather."