OPEC+ sees stronger oil demand ahead

Oil clawed back losses after an OPEC+ panel boosted its global demand growth view, while the worsening COVID-19 crisis in India held back prices from further gains.

Futures in New York were little changed following a rebound from a loss of as much as 2.4 per cent earlier Monday. An OPEC+ technical committee was said to raise its global oil demand growth forecast for 2021 to 6-million barrels a day, according to delegates. Earlier, OPEC Secretary-general Mohammad Barkindo said that the group sees “positive signals” in the global economy, but that there are factors in the oil market that require ongoing vigilance.

The psychological effect of the higher forecast “is making people a little more optimistic about oil demand,” said Michael Lynch, president of Strategic Energy & Economic Research.

“We’re seeing serious progress toward getting people vaccinated and opening up the economy,” especially in the U.S.

The OPEC+ panel’s global demand growth estimate for 2021 is up from its projection last month, though in line with OPEC’S April monthly report. The committee sees global oil inventories declining by 1.2-million barrels a day this year on average.

Still, emerging signs of strain on India’s refiners continue to weigh on prices. Indian Oil Corp. is looking to sell gasoline into the spot market, a potential indication of weak domestic demand. Meanwhile, the country’s refiners are being forced to postpone planned shutdowns for maintenance at some plants as workers are either fleeing or falling ill amid the pandemic’s rampant resurgence there.

The deteriorating situation there could pose a problem for the Organization of Petroleum Exporting Countries and its allies, which have agreed to start adding more supply from May. The OPEC+ Joint Technical Committee’s report warned that the COVID-19 surge in India and Brazil may “derail” the oil demand recovery.

“Global demand is seeing a setback, with countries like India going into full-scale chaos,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago. “It’s got people more cautious as far as travel.”

Among the worrying signs for India’s demand recovery, IOC has not yet issued an expected tender to purchase West African crude and Mangalore Refinery & Petrochemicals Ltd. has cut processing rates.

The world’s third-largest oil importing country has been a particular area of concern for the oil market in recent days as it faces record daily coronavirus case counts and renewed restrictions in some parts of the country.

The road to a full-blown global recovery from the pandemic could still be some ways out. .