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(Bloomberg) -- Oil edged higher as strengthening demand signals from key economies offset concern around the rampant virus resurgence in countries such as India.
West Texas Intermediate snapped a back-to-back streak of declines after flipping between modest gains on losses on Thursday. U.S. gasoline demand is improving, while jobless claims fell to the lowest since the pandemic began. Casting a cloud over the prospects for a global recovery, India -- the third-largest oil importer -- posted the world’s largest one-day jump in coronavirus cases.
“Demand is not outstripping expectations at this point,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. “Until we get reopened, and travel and activity really picks up again, that leaves the market in a betwixt and between spot.”
It’s an increasingly complex global demand picture for the market to get a handle on. Japanese Prime minister Yoshihide Suga recommended placing Tokyo and other cities under a state of emergency months before the capital hosts the Olympics. Conversely, there is a much more optimistic outlook in the U.S. Refining margins have significantly improved there with gasoline demand at 93% of pre-pandemic levels and diesel fully recovered, Valero Energy Corp. Chief Executive Officer Joe Gorder said in a conference call with analysts.
“We’re pretty bullish on gasoline going forward,” Valero Chief Commercial Officer Gary Simmons said on the same call. “As people return to a normal-style life, we’re seeing that people are driving more and kind of avoiding mass transit for the summer season.”
Many regions are moving forwarding with plans to open up. Among them, France will lift curbs on regional movement and reopen schools in the coming weeks, and Greece will ease most lockdown measures in May before welcoming back tourists. California, which plans to fully reopen the economy on June 15, has quickened its pace of oil imports from Latin America and raised refinery run rates in advance of an expected summer rebound.
The U.K. is also showing signs of a robust recovery. U.K. government data shows average road fuel sales last Friday topped pre-pandemic levels for the first time since September.
On the supply side, the OPEC+ coalition is set to start returning more barrels to the market next month. Traders are also watching for a potential relaxation of American sanctions on Iran, though the U.S. has talked down the prospect of an imminent deal.
“Oil markets are likely to be stuck in a holding pattern until next week’s OPEC+ supply decision is announced,” said Ryan Fitzmaurice, commodities strategist at Rabobank. It is likely for “more range-bound trade to take place until the market gets more clarity on both the supply and demand front as we approach the all-important summer driving season.”
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