NEW YORK • Oil edged lower in early Asian trading on Friday as investors assessed the outlook for demand ahead of a key Opec+ meeting this week.
Futures in New York traded near US$62 a barrel after advancing 1.2 per cent, the most in more than a week. While the US and China are recovering strongly from the pandemic, the market is facing near-term headwinds from a Covid-19 flare-up in India. That could pose a problem for the Opec+ alliance, which has agreed to start adding more crude supply from May.
Signs of strain on India's refiners are starting to emerge. Mangalore Refinery & Petrochemicals has cut processing rates, while Indian Oil Corp has so far failed to issue an expected tender to purchase West African crude.
Oil's robust start to the year faltered in mid-March as some regions started to see a virus resurgence, though prices are still up almost 30 per cent this year. Despite additional barrels set to hit the market next month, global benchmark Brent is firming in a bullish backwardation structure, signalling little concern about fresh supply. Opec+ is scheduled to hold its meeting tomorrow.
Another wild card is the prospect of more crude flows from Iran as the nation seeks to revive a nuclear deal and free itself of United States sanctions, but talks are ongoing and progress on a solution remains uncertain.
The prompt time spread for Brent was 68 US cents a barrel in backwardation, where near-dated contracts are more expensive than later-dated ones. That compares with 40 US cents at the start of the month.
There are signs of a broader recovery, despite the challenges presented by the Indian crisis. The chief executive officer of top oilfield contractor Schlumberger forecast global oil demand should return to pre-pandemic levels by the end of next year, if not sooner, while China's economy continued to boom this month from the record growth in the first quarter.