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James Hyerczyk
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WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Friday with buyers taking a break following three days of soaring prices that drove the markets into six-week highs on Thursday. Prices soared as strong U.S. economic data, a weak dollar and an expected recovery in demand outweighed concerns about higher COVID-19 cases in Brazil and India.

At 09:23 GMT, June WTI crude oil futures are trading $64.35, down $0.66 or -1.02% and July Brent crude oil is at $64.53, down $0.52 or -0.76%.

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Oil prices are under pressure again as concerns of wider lockdowns in India and Brazil to curb the COVID-19 pandemic offset a bullish outlook on summer fuel demand and economic recovery.

Prices also came under pressure after China’s factory activity growth slowed and missed forecasts in April, although a private sector survey showed that Japan’s factory activity expanded in April at the fastest pace since early 2018.

Continued Concerns Over India Demand

India’s total COVID-19 cases passed 18 million on Thursday after another world record number of daily infections, as grave diggers worked around the clock to bury victims and hundreds more were created in makeshift pyres in parks and parking lots.

India reported 379,257 new infections and 3,645 new deaths on Thursday, health ministry data showed, the highest number of fatalities in a single day since the start of the pandemic.

The world’s second most populous nation is in deep crisis, with hospitals and morgues overwhelmed.

The surging infection numbers and renewed mobility-restricting measures have “forced us to revise down Indian gasoline and gasoil demand” estimates for 2021, said JBC Energy’s senior analyst Eugene Lindell.

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China’s Factory Activity Growth Slows on Supply Bottlenecks, Soft Demand

China’s factory activity growth slowed and missed forecasts in April as supply bottlenecks and rising costs weighed on production and overseas demand lost momentum.

The country’s official manufacturing purchasing manager’s index (PMI) fell to 51.1 in April from 51.9 in March, data from the national Bureau of Statistics (NBS) showed on Friday.

It remained above the 50-point mark that separates growth from contraction on a monthly basis but was below the 51.7 expected in a Reuters poll of Analysts.

“Some surveyed companies report that problems such as chip shortages, problems in international logistics, a shortage of containers, and rising freight rates are still severe,” NBS statistician Zhao Qinghe said in a statement accompanying the official PMI.

Daily Forecast

This week’s price action suggests investors have confidence in OPEC’s ability to stabilize supply and prices even in the face of short-term demand issues due to the rising COVID-19 cases in India, Japan and Brazil.

Furthermore, investors are also betting that the demand problems are a short-term issue and conditions will start to improve as more people receive vaccinations. Demand is also expected to pick up in other parts of the world, perhaps offsetting some of the losses from India.

“Summer season is a synonym for driving season and drivers in the United States, China and the United Kingdom are about to start consuming more fuel, a development the market believes will make up for India’s COVID-19 downturn,” Bjornar Tonhaugen, head of oil markets at Rystad Energy.

For a look at all of today’s economic events, check out our economic calendar.

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