May 27, 2021: Oil prices fell on Thursday but stayed within the tight range set this week, with optimism about the summer driving season in the United States and Europe offsetting concerns on demand in India and a potential increase in Iranian supplies.
Brent crude had shed 42 cents, or 0.6%, to $68.45 a barrel by 0641 GMT, erasing Wednesday's gain of 22 cents. Brent has traded between $68 and $69 for most of this week.
U.S. West Texas Intermediate (WTI) crude fell 35 cents, or 0.5%, to $65.86 a barrel, after a rise of 14 cents on Wednesday, but still within the week's $65 to $66 range.
“Most of the eurozone countries' travel restrictions are lifted considering lower COVID-19 cases boosting demand. However, the rise in cases across many Asian countries including India and the tighter lockdowns have capped a price rally,” said Sunilkumar Katke, head of currencies and commodities at Axis Securities.
“Iranian oil entering in the international crude market may take some more time and hence the prices are still holding firm in the short term.”
The markets remain focused on the Iranian nuclear talks and whether sanctions on its oil exports are lifted in full, and when, Citi analysts said in a note.
That will be a big issue for the next meeting of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, on June 1, where producers will have to assess whether to change their plans for easing production curbs against the prospect of Iranian supply returning to the market.
Citi predicted OPEC+ would stick to plans to bring back 700,000 barrels per day (bpd) of oil supply in June, but the group's plan to step up supply by a further 840,000 bpd in July “might now be in question”.
Analysts said any increase of supply from Iran would only be gradual, with JPMorgan estimating Iran could add 500,000 bpd by the end of this year and a further 500,000 bpd by August 2022.
While the market was supported on Wednesday by a bigger-than-expected drawdown in U.S. oil inventories, there are still concerns about demand shrinking in India, the world's third-largest oil consumer. [EIA/S]
“However, we don't think demand concerns in India will derail the narrative of global oil demand recovering,” said Vivek Dhar, commodities analyst at Commonwealth Bank.