Oil Wavers With Inflation Concerns Clouding Demand Outlook - Bloomberg

Key Saudi Arabian Oil Site Attacked, Sending Brent Above $70 — Photographer: Simon Dawson/Bloomberg

Oil fluctuated between gains and losses as a strengthening U.S. dollar offset signs of a demand rebound in India.

West Texas Intermediate futures were little changed, with prices remaining within the $5 range they’ve been holding since around mid-March. The dollar strengthened on Friday, with a higher-than-expected rise in U.S. March producer prices stoking further concern over inflation. The Bloomberg Dollar Spot Index rose as much as 0.4%, reducing the appeal of commodities priced in the currency.

Still, prices found some support after India reported the strongest demand for oil products since March even as the country saw Covid-19 cases soar.

“Inflation is going to take some of the purchasing power from the consumer, and that’s going to ultimately impact gasoline consumption,” said Bob Yawger, head of the futures division at Mizuho Securities. “We’ve been trading in this range,” as the energy market “looks for clarity on the gasoline situation and the situation surrounding demand.”

Crude's rally has run out of steam in recent weeks

Oil is headed for a weekly decline, with the demand backdrop still mixed. While the rollout of vaccines has shown signs of boosting consumption in places like the U.S. and U.K., cases continue to spread elsewhere. Japan is set to reimpose lockdowns in Tokyo, Kyoto and Okinawa. OPEC+ plans to reintroduce more than 2 million barrels a day to the market over the coming months and, further out, there’s concern Iranian barrels may also return to swell supplies.

“While energy demand has remained supported by a powerful recovery in APAC and the U.S., concerns are emerging that a sweeping third wave of infections could delay the recovery,” TD Securities commodity strategists led by Bart Melek said in a note.

Prices
WTI for May delivery fell 27 cents to $59.33 a barrel at 10:25 a.m. in New York, heading for a about a 3.5% weekly decline Brent for June declined 30 cents to $62.90 a barrel. The contract is heading for a 3.1% loss

Crude in New York has been hemmed into a narrow range around $60 a barrel since mid-March, with market volatility slumping to the lowest in a month.

With OPEC+ reinstating some of its output cuts, “upside potential for oil prices seems limited,” said Hans van Cleef, a senior oil analyst at ABN Amro. Still, with demand set to recover, “investors see the light at the end of the tunnel, and thus keep some of their long positions.”