Oil prices extended gains on Friday and were on course for a weekly gain of about 7% with an improved oil demand outlook and strong economic recoveries in China and the United States offsetting concerns about spikes in COVID-19 infections.
Brent crude futures rose 30 cents, or 0.5%, to $67.24 a barrel at 0551 GMT, following a 36 cent rise on Thursday.
U.S. West Texas Intermediate (WTI) crude futures were 28 cents, or 0.4%, higher to $63.74 a barrel, after climbing 31 cents on Thursday.
China’s 2021 net crude oil imports are forecast to grow 3.4% this year versus 2020 to about 11.2 million barrels per day, a unit of top oil and gas group China National Petroleum
China reported a record 18.3% jump in economic growth in the first quarter from a coronavirus-induced slump earlier last year, though the pace of expansion is expected to moderate later in the year.
Strong economic recoveries around the world and supply curbs by OPEC and its allies, together called OPEC+, as well as a cautious response to higher prices by U.S. oil producers are supporting the market, said Westpac senior economist Justin Smirk.
“We still think there’s a clear risk prices could rise up to $70 a barrel before we see a more meaningful pull back,” Smirk said.
He said the longer prices stay elevated, the more supply is likely to return to the market, and the risks of COVID-19 cases spiking in places like India and Europe could eventually drive prices down.
Taking into account worsening coronavirus developments in some countries, “crude overshot to the upside this week and a pullback is now due,” said Vandana Hari, energy analyst at Vanda Insights.
“India and major economies in Europe need to be reckoned with to complete the oil demand picture,” said Hari.
India breached 200,000 daily infections for the first time on Thursday.
For the moment, a strong jump in U.S. retail sales, a drop in unemployment claims and signs of more cars on the road in the world’s biggest economy buoyed the market.
“The reopening of the (U.S.) economy has already seen traffic levels increase in various states across the nation,” ANZ analysts said in a note, adding that India and China are also showing “high levels of congestion”.
Traders are looking ahead to a summer pick-up in traffic typical in the United States in June through August.
“With miles driven on the U.S. highways up for the first time since the pandemic outbreak, it means we are well on the way to a bountiful U.S. summer driving season that could come close to matching the summer of 2019,” Axi chief global market strategist Stephen Innes said in a note.
Sonali PaulRoslan Khasawneh