By Barani Krishnan
Investing.com - Oil prices were down as much as 3% for the week as concerns over summer fuel demand offset news that Europe appeared to be finally turning the corner on its Covid-19 vaccine crisis.
Germany doubled the number of daily Covid-19 vaccinations, France hit a key immunization milestone a week ahead of schedule, and Italy was set to ease lockdown restrictions as contagion rates slow, reports said on Friday.
Yet, both U.S. crude and global benchmark Brent fell more than $1.50 per barrel for the week on concerns over how demand for gasoline, diesel and jet fuel will fare in the second quarter, which typically marks the seasonal pickup for travel that lasts through early in the third quarter.
To be fair, much of the week’s price drop was due to a 4% slump on Monday as traders reacted to a decision by producer alliance OPEC+ to ease output cuts between May and July, despite a less-than-rosy second quarter outlook.
While crude prices had rebounded from Monday’s lows, their recovery was too feeble to make a difference, in the face of on-off-and-on-again problems in Europe.
“The crude demand outlook for Europe and emerging markets is still messy and until optimism returns, oil prices could remain heavy,” said Ed Moya, who heads U.S. markets research for online broker OANDA. “Oil is in for a choppy trade environment over the next couple of weeks.”
New York-traded West Texas Intermediate, the benchmark for U.S. crude, was down 32 cents, or 0.5%, to $59.28 per barrel by 2:08 PM ET (18:08 GMT) Friday. For the week, WTI was down 2.5%.
London-traded Brent, the global benchmark for crude, was down 25 cents, or 0.4%, on Friday, trading at $62.95. For the week, Brent was down almost 3%.
Earlier this week, reporting on the Covid-19 pandemic showed the U.K. variant of the virus continuing to scorch parts of Europe — with Poland experiencing 60 times more cases than a year ago.
India, the third-largest buyer of crude after China and the United States, saw a record of more than 100,000 new daily infections at the weekend.
Crude prices have also come under pressure after Iran opened talks with global powers in Vienna this week to find a way to end the two-year long U.S. sanctions on its oil imposed by the former Trump administration.
The White House, now under President Joseph Biden, is agreeable to ending the sanctions, provided Tehran shows proof that its nuclear program isn’t capable of producing an atomic bomb. Iran is, however, demanding the sanctions be removed first before it makes such concessions.
Despite the differences between the two sides, the talks have made progress almost every day since they began on Tuesday, reports said.
Iran has said that it could return “within months” to its peak oil production of nearly 4 million barrels a day once the sanctions are lifted. Sources familiar with the country’s crude output currently estimated its production at around 2 million barrels daily.
Analysts say the additional supply from Iran, whenever it comes, will force a reconfiguration of global oil supply that could be more bearish than bullish.