Oil Gains on Global Demand Recovery, But India, Asia, Still Sources Of Concern

Meanwhile, jet travel in the U.S. surges as Covid restrictions are relaxed: File Image/Pixabay

The remarkable plummet in Covid rates around the world due to aggressive vaccination campaigns narrowly offset traders' concerns about infection numbers in India and other parts of Asia - and as a result, oil prices on Monday enjoyed a modest increase of slightly over 1 percent.

Gains were  said to be capped by less-than stellar manufacturing data and unexpectedly low retail sales from China in April; however, its crude throughout for that month rose 7.5 percent from the same month a year ago.

With the U.K. economy reopened, France and Spain relaxing their Covid restrictions, and Portugal and the Netherlands over the weekend easing travel restrictions, traders caused Brent on Monday to settle up 75 cents, or 1.1 percent, at $69.46 per barrel; West Texas Intermediate settled up 90 cents, or 1.4 percent, at $66.27.

Kevin Solomon, analyst at StoneX, portrayed the oil market as "trapped between observing encouraging improvements in demand in the United States and Europe, and the sluggishness in consumption due to the persistence of COVID-19 in Asia."

Indeed, domestic sales of gasoline and diesel by Indian state refiners plunged by a fifth in the first half of May from a month earlier, and in Japan three more prefectures have been declared to be in a state of emergency.

Still, the vaccinations are beginning to have the desired effect in India, and analysts believe China’s crude oil demand may increase from June onwards due to about 1.2 million barrels per day (bpd) of refining capacity currently offline scheduled to restart next month.

Also on Monday, the most important component of demand recovery showed signs of vigour as the number of people passing through checkpoints at U.S. airports climbed to 1.85 million on Sunday - the highest since March 2020 - pointing to the recovery in domestic U.S. air travel.

After United Airlines Holdings Inc. on Monday said it plans to resume 80 percent of its pre-pandemic U.S. schedule, Phil Streible, chief market strategist at Blue Line Futures, remarked, “More and more people are getting vaccinated and those people are now travelling.”