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Futures Movers: Oil falls on renewed global growth fears, but stays on track for monthly gains

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Oil futures fell Friday, with weakness tied to worries over the global economic outlook, but prices remained on track for weekly and monthly gains.

“Today concerns over rising COVID cases are raising their head again,” said Sophie Griffiths, market analyst at Oanda, in a note. “The COVID crisis in India, the world’s third-largest importer of oil, continues to escalate and, in fact, shows no signs of abating.”

India reported 386,452 new cases in a single day, breaking a record it set a day ago, according to the Indian Health Ministry, and 3,498 deaths. 

However, “global oil demand is set for a massive boost in the coming months that will offset Indian demand losses and OPEC’s supply come-back, and that is why prices have been mostly rising during the week,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

“U.S. consumers are a major reason markets remain bullish,” he said daily commentary. “China and the U.S. locomotives are far outweighing the size of the Indian slowdown.”

In the worst case, India can lose half of its 4.8 million barrels per day of oil consumption temporarily, and “see a longer U-shaped demand recovery than the 1.0 million bpd demand loss impact we project for May,” Tonhaugen said. “But the Chinese and U.S. oil demand recovery in the next 3 months alone will be above 1 million bpd and net the India demand loss out.”

West Texas Intermediate crude for June delivery
CL00,
-2.32%

CLM21,
-2.32%

fell $1.56, or 2.4%, to $63.45 a barrel on the New York Mercantile Exchange. Based on the front-month contracts, WTI was on track for a 2% weekly rise and an April gain of around 7.1%.

Ahead of the expiration at the end of the session, the June Brent crude contract
BRNM21,
-1.84%

fell $1.27, or 1.9%, to $67.29 a barrel on ICE Futures Europe. It traded up 1.7% for the week and up 7.1% for the month.

July Brent
BRN00,
-2.01%

BRNN21,
-2.01%
,
the most active and soon-to-be front month contract, was down $1.41, or 2.1%, at $66.64 a barrel.

China’s official manufacturing purchasing managers index declined to 51.1 in April from 51.9 in March, according to data released Friday by the National Bureau of Statistics. The reading was much lower than the 51.6 median forecast expected by economists polled by The Wall Street Journal, but remained above the 50 level, marking an expansion in activity.

Data showed the eurozone economy shrank at the beginning of 2021 for the second consecutive quarter, entering its second technical recession in a year.

That said, strong economic data out of the U.S., including a rise of 4.2% in March consumer spending, and expectations for strengthening activity around the world in coming months has helped crude rally in April.

Read: ‘Summer scramble’ for gasoline on tap amid tank-truck driver shortage

“With the U.S. economy firing up on all cylinders, the oil demand outlook is strengthening. Oil markets have been focused on the rising demand story, which it believes will offset any OPEC+ agreed rise in output from May,” Oanda’s Griffiths said.

Petroleum product prices on Nymex also moved lower Friday, but were poised for monthly gains.

May gasoline
RBK21,
-1.83%

fell 1.8% to $2.06 a gallon, trading 5.2% higher for the month, while May heating oil
HOK21,
-2.28%

shed 2.3% to $1.92 a gallon, looking at an 8.3% rise for the month. The May contracts expire at the end of the day’s session.

June natural gas
NGM21,
+0.96%

traded at $2.94 per million British thermal units, up 0.9% in Friday dealings, poised for a monthly rise of about 10%.

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