Oil dips below $65 as investors assessing near-term demand

Bloomberg

Oil drifted lower as a demand recovery in key regions raised optimism about rising fuel consumption, despite a Covid-19 flare-up in parts of Asia.
Futures in New York slipped near $65 a barrel while Brent fell towards $68 in London as the dollar nudged higher. Chinese refiners have churned through record volumes of crude so far this year, but Indian fuel demand continued to weaken in the first half of May. It underscores the uneven rebound that has slowed crude’s rally. The US and China, along with parts of Europe, are recovering strongly from the pandemic as vaccinations accelerate. The premium for Brent’s nearest monthly contract over the next one has started widening again in a bullish backwardation structure, signalling a tightening market.
Still, renewed demand concerns are emerging in Asia, where the coronavirus is crippling key importer India, while Singapore and Taiwan grapple with new outbreaks. Another wildcard is the prospect of more crude flows from Iran as the nation seeks to revive a nuclear deal and free itself of US sanctions. Talks are ongoing, however, and progress on a solution remains uncertain.
“Overall positive sentiment in commodity markets seems to counter any negative from the progress in nuclear talks,” said Jens Pedersen, senior analyst at Danske Bank A/S. “There are some important local stories to follow. India’s oil demand has dropped on the back of lockdowns.” West Texas Intermediate for June delivery lost 44 cents to $64.93 a barrel at 8:47 am New York time. Brent for July settlement lost 39 cents to $68.32.
There were some reasons for physical markets to be tentatively optimistic. Last week, India’s biggest refiner was looking to buy crude for the first time in a month. Meanwhile, a unit of a giant Chinese refiner issued a purchase tender on Monday.
The steady recovery in US air passengers continued too. The number of people passing through Transportation Security Administration (TSA) checkpoints at airports hit its highest since the pandemic began, surging to 1.85 million.

While the figures are still down about a third, United Airlines Holdings Inc said it plans to operate 80% of its pre-pandemic US schedule.
The Environmental Protection Agency ordered the shutdown of a US Virgin Island refinery that historically was positioned as a key fuel source for the East Coast due to public health concerns.
Ampol Ltd will continue refining at its Lytton plant until at least mid-2027, as the Australian government provides financial support for the nation’s remaining processors.