Oil Flat As Demand Recovery Worries Persist And U.S. Dollar Drops

However, the oil futures curve is showing strength: File Image/Pixabay

Crude traders' concerns about weaker demand due to rising Covid rates in some parts of the world were somewhat offset on Thursday by a falling U.S. dollar and rising stock markets, with the result being that oil prices remained little changed from the previous session.

Brent remained unchanged at $63.16 per barrel by 2:00 p.m. EDT (1800 GMT), while West Texas Intermediate fell 27 cents to $59.50.

Edward Moya, senior market analyst at OANDA, said, "Crude prices are struggling for direction as short-term Covid pressures are countered by a much weaker U.S. dollar," a reference to the dollar falling to a two week low on data showing an increase in U.S. weekly jobless claims. 

Meanwhile, according to a draft government document seen by media, Russia thinks the fallout from the pandemic lockdowns on the global consumption of oil may last until 2023-2024; the document also showed that the former Soviet Union could lose global oil market share due to curbs on oil production and exports.

But despite the usual myriad concerns, the oil futures curve is showing strength, and Bloomberg noted on Thursday that "The premium on the nearest global benchmark Brent contract rose to the highest in a week against the following month; the bullish backwardation structure indicates tightening supplies......WTI's so-called prompt spread also strengthened."

Meanwhile, the latest development in yet another concern among analysts–the prospect of the U.S. and Iran reviving the nuclear deal and lifting the sanctions imposed on the Islamic republic–occurred on Thursday when a government official told media that India's state-run oil refiners are ready to snap up Iranian crude as soon as the sanctions are eased.

Refiners, discouraged by the price of supplies from Saudi Arabia, have reportedly started making preparations in advance of the possible removal of penalties so they can swiftly enter into contracts for Iranian supply; this includes drafting commercial terms and putting in place mechanisms to quickly assess crude quality.