Oil Down, COVID-19 Outbreak Continue to Sustain Fuel Demand Worries

Oil was down Friday morning in Asia as the slow rollout of COVID-19 vaccines and the continuous COVID-19 outbreaks in several countries cast a shadow over the fuel demand outlook.

Brent oil futures edged down 0.13% to $71.22 by 12:04 AM ET (4:04 AM GMT) and WTI futures inched down 0.07% to $68.76.

Crude oil supply data from the U.S. Energy Information Administration showed a draw of 5.080 million barrels in the week to May 28. The draw was bigger than both the 2.443-million-barrel draw in forecasts prepared by Investing.com and the 1.662-million-barrel draw reported during the previous week.

Crude oil supply data from the American Petroleum Institute released the day before showed a draw of 5.360 million barrels.

On the COVID-19 front, the slow rollout of COVID-19 vaccinations and recent outbreaks of COVID-19 cases in countries such as Brazil and India clouded the fuel demand outlook.

“We continue to view oil demand recovery as largely a function of vaccinations… the U.S. and Europe are well advanced in their inoculation efforts,” JPMorgan Chase (NYSE:JPM) commodities analysts said in a note.

But the note added that the slow rollout of COVID-19 vaccinations in developed and emerging Asian countries alike indicates “there is no clear end in sight to social distancing restrictions in the region.”

Earlier this week, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) forecasted fuel demand will surpass supply in the second half of 2021. The cartel also agreed at its meeting on Tuesday to continue with supply restraint through July, giving a boost to oil prices. However, it didn’t give any clues on future supply policy.

OPEC+ may need to keep increasing fuel supply in August or September to meet the demand recovery, Gazprom (MCX:GAZP) Neft PJSC Chief Executive Officer Alexander Dyukov told Bloomberg.

Other investors remained more optimistic.

“The market can easily absorb the incremental supply from OPEC+,” Dominic Schnider, head of commodities and Asia Pacific foreign exchange at UBS Global Wealth Management, told Bloomberg. HE added that the resurgence of COVID-19 cases in parts of Asia is unlikely to derail the global recovery.