Oil Sags Below $63 as Traders Weigh Firmer Dollar, Global Demand

Oil headed for a back-to-back decline as the dollar firmed and investors assessed the scope for further near-term gains after the commodity posted the biggest weekly advance since early March.

West Texas Intermediate fell 0.4% as the U.S. currency rebounded following a five-day losing run. Last week, oil futures were boosted by a wave of positive economic data from the U.S. and China, another drawdown in crude stockpiles, and optimistic assessments about consumption from both the Organization of Petroleum Exporting Countries and the International Energy Agency.

Oil has risen almost 30% in 2021 in a stop-start advance as progress on vaccines to combat the coronavirus pandemic aids demand, but virus flare-ups in some countries act as a substantial drag. After OPEC and its allies presided over supply cuts to drain bloated stockpiles, the cartel now plans to start restoring barrels from May. Still, global Covid-19 cases hit a record last week, casting some doubt on the hope that the end of the outbreak is in sight.

“Prices are going through a temporary correction, since demand is proving to be unpredictable,” said Will Sungchil Yun, a senior commodities analyst at VI Investment Corp. in Seoul, noting that there were still concerns surrounding a global virus resurgence.

Highlighting progress on vaccinations, half of Americans 18 years or older have now received at least one dose. At the same time, however, the outbreak remains rampant in Brazil and India. The Asian nation is battling a new variant that’s threatening oil demand, with fuel sales sagging in the first half of April.

Investors are also following high-level talks between Iran, the U.S. and other nations in Vienna aimed at ending the standoff over the nuclear deal abandoned by former President Donald Trump. Washington described negotiations as “constructive,” while the Islamic Republic signaled it was ready to debate the details of reviving the accord. An agreement may see U.S. sanctions on Iranian oil exports lifted, potentially boosting supplies.

There will be further pointers on the outlook this week when the IEA unveils its Global Energy Review on Tuesday, which will lay out the pathway for worldwide demand over 2021. Also of note, oil-service giants Baker Hughes Co., Halliburton (NYSE:HAL) Co., and Schlumberger (NYSE:SLB) all release quarterly financial results.

Brent’s prompt timespread was 47 cents a barrel in backwardation compared with 42 cents a week ago and 40 cents at the start of the month. That’s a bullish pattern, with near-term prices trading above those further out.