Oil prices stable as recovery confidence holds up

British economy reopened after gloom of four-month Covid-19 lockdown

LONDON:

Oil prices held firm on Monday, trading in a tight range as European economic reopenings offset gloom from surging Covid-19 cases in Asia, fresh restrictions and underwhelming Chinese manufacturing data.

Brent crude rose $0.03, or less than 0.1%, to $68.74 a barrel at 1013 GMT, and West Texas Intermediate (WTI) US crude was up by $0.04, or 0.1%, at $65.41.

Both contracts have risen more than 30% since the start of the year.

"The fact that prices remained relatively stable during this rather turbulent five-day period indicates that the confidence in a healthy oil market remains intact and unless something unpredictably negative occurs, any downside potential will be limited," PVM Oil analyst Tamas Varga said.

The British economy reopened on Monday, giving 65 million people a measure of freedom after the gloom of a four-month Covid-19 lockdown.  

With accelerating vaccination rates, France and Spain have eased Covid-related restrictions in recent weeks, and Portugal and the Netherlands eased on Saturday travel restrictions as the summer holiday season approached.

The promise of strong economic growth has kept oil prices high in recent weeks, although the pace of inflation has kept many investors concerned about the possible rise of interest rates and fall of consumer spending.

Investors also remained cautious on worries that the highly transmissible coronavirus variant first detected in India is spreading to other countries.

Some Indian states said on Sunday they would extend Covid-19 lockdowns to help contain the pandemic, which has killed more than 270,000 people in the country.  

Domestic sales of gasoline and diesel by Indian state refiners plunged by a fifth in the first half of May from a month earlier.  

Singapore is preparing to close schools this week, meanwhile Japan has declared a state of emergency in three more prefectures to contain outbreaks.  

Disappointing economic data from China also added to pressure.

China's factories slowed their output growth in April and retail sales significantly missed expectations as officials warned of new problems affecting the recovery in the world's second-largest economy.  

China's crude oil throughput rose 7.5% in April from the same month a year ago, but remained off the peak seen in the last quarter of 2020.  

"With growing concerns over the spreading pandemic in Asia, Brent prices are expected to stay in a trading range this week," said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.

On the US East Coast gasoline shortages that have plagued eased on Sunday, with 1,000 more stations receiving supplies as Colonial Pipeline's 5,500-mile (8,900-km) system recovered from a crippling cyberattack.  

US energy firms added oil and natural gas rigs for a third week in a row as higher crude prices prompt some drillers to return to the wellpad, energy services firm Baker Hughes Co said on Friday.