The Vopak oil storage terminal in Johor, Malaysia. Picture: REUTERS/HENNING GLOYSTEIN
The Vopak oil storage terminal in Johor, Malaysia. Picture: REUTERS/HENNING GLOYSTEIN

Melbourne — Oil prices fell on Friday but were on track to post solid gains for the week with demand growing faster than supply, while vaccinations dampen the impact of a resurgence in coronavirus cases worldwide.

Brent crude futures fell 40c, or 0.5%, to $75.65 a barrel by 1.51am GMT after a 1.75% jump on Thursday. US West Texas Intermediate (WTI) crude futures fell 38c, or 0.5%, to $73.24 a barrel, whittling down a 1.7% rise from Thursday.

Both benchmark contracts were headed for gains of about 2% for the week, buoyed by indications of tight crude supplies and strong demand in the US, the world’s biggest oil consumer.

“We’ve got stronger prices for a bit longer now, because it’s a fundamental supply-demand issue in terms of the recovery in demand we’re seeing in places like the US,” said Justin Smirk, senior economist at Westpac.

US crude and petrol inventories fell sharply in the latest week, with crude stocks at Cushing at their lowest since January 2020, reflecting strong demand growth. ANZ analysts noted even jet fuel consumption in the country had hit its highest level since March 2020.

Even with coronavirus cases rising in the US, all around Asia and parts of Europe, analysts said rising vaccination rates would limit the need for the harsh lockdowns that gutted demand during the peak of the pandemic last year.

“I think the risks of the large shutdowns we saw last year are much lower,” Smirk said.

Analysts point to a rapid rebound in India’s petrol consumption and industrial production after its Covid-19 surge earlier this year as a sign that economies are more resilient to the pandemic.

“Yes, Delta is a risk, but is it going to derail demand growth in the second half? We may not see that,” said Commonwealth Bank commodities analyst Vivek Dhar.

Reuters

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