Analysts Maintain Bullish Outlook, But India Again Causes Oil Price Drop

Some analysts think the U.S. Memorial Day weekend will release pent-up demand: File Image/Pixabay

Thursday saw crude traders again swayed by India's rising Covid rates instead of easing restrictions across Europe and the U.S.; and the notion that the world's second most populous nation could impede a global economic demand recovery caused oil to drop by over 1 percent.

Brent settled lower by 87 cents, or 1.3 percent, at $68.09 per barrel, while West Texas Intermediate dropped 92 cents, or 1.4 percent, to $64.71.

However, the previous session's news that U.S. crude stocks fell more than expected last week was said to have minimized the losses.

Also, despite the grim headlines about India and trader fears, analysts continue to focus favourably on the easing Covid restrictions: Citi analysts said in a note,  "As the rollout of vaccines continues and a pent-up summer driving season continues to manifest, this trend should accelerate, keeping demand for motor fuels robust and boosting market confidence in the recovery story."

Bob Yawger, head of the futures division at Mizuho Securities, said, "With Memorial Day weekend so close here, the gasoline demand scenario is just too strong to see crude oil fall apart."

However, Bloomberg noted that the crude market's underlying structure has weakened in recent sessions: "The backwardation between Brent's two nearest contracts -- which signals tightening supplies -- has narrowed since the end of last week; the backwardation in WTI's so-called prompt spread has also softened compared to last Friday."

Thursday also saw the latest energy-related company to post a massive improvement in profits compared to at the height of the pandemic: San Miguel Corp., the Philippines' largest company, posted a net income of 17.2 billion pesos ($359 million) in the three months ended March, compared to 1.1 billion pesos a year ago, it said in a statement.

Ramon Ang, president of San Miguel, said, "We're encouraged by these improvements, as they reflect that our businesses are definitely headed towards full recovery."