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Oil prices dip but recovery confidence limits fall

Commodities18 minutes ago (May 17, 2021 09:22AM ET)

(C) Reuters. FILE PHOTO: An oil storage tank and crude oil pipeline equipment is seen during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. REUTERS/Richard Carson

By Bozorgmehr Sharafedin

LONDON (Reuters) -Oil prices edged lower Monday as underwhelming Chinese manufacturing data and fresh restrictions in Asia sparked by surging COVID-19 cases weighed on sentiment, although European economic reopenings lent some support.

Brent crude fell 30 cents, or 0.4%, to $68.41 a barrel at 1302 GMT, and West Texas Intermediate (WTI) U.S. crude was down by 34 cents, or 0.5%, at $65.03.

“The market is seemingly trapped between observing encouraging improvements in demand in the United States and Europe, and the sluggishness in consumption due to the persistence of COVID-19 in Asia,” said StoneX analyst Kevin Solomon.

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.

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.

On the U.S. 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.

U.S. 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.

“The ongoing solid economic growth provides a fertile soil for global oil demand recovery, something that would only be disturbed by the … worldwide spread of the virus,” PVM Oil analyst Tamas Varga said.

Oil prices dip but recovery confidence limits fall

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