By Geoffrey Smith
Investing.com -- Crude oil prices drifted sideways in subdued trading on Monday, with support from the weaker dollar being offset by the ongoing demand problems in India, one of the world’s biggest importers, due to the Covid-19 pandemic.
The coronavirus has run amok on the sub-continent in recent weeks, and the seven-day average for daily new cases hit a new record at the weekend well over twice the previous peak seen last September. Increasingly, that’s translating into broader lockdowns across India and lower fuel demand accordingly.
By 10:45 (1445 GMT), U.S. crude futures were down less than 0.1% at $63.14 a barrel, while Brent crude futures were down 0.2% at $63.66 a barrel.
U.S. Gasoline RBOB Futures were down 0.3% at $2.0338 a gallon.
Also weighing on prices were signs of progress regarding talks to revive the UN-sponsored agreement preventing Iran’s enrichment of uranium and its suspected pursuit of a nuclear bomb. A senior Russia diplomat noted after weekend talks that “the negotiations entered the drafting stage. Practical solutions are still far away, but we have moved from general words to agreeing on specific steps towards the goal.”
An agreement that would allow Iran to return to pumping oil freely is one of the wild cards on the supply outlook in the foreseeable future, a factor that could upset the carefully calibrated production quotas in the so-called OPEC+ agreement (which doesn’t bind Iran). One of the other few wild cards - the return of U.S. supply growth - still seems some way off, with the number of active oil rigs rising only by 7 last week. Even so, the new figure of 344 represented the highest figure in a year.
For the most part, however, analysts are expecting further gains over the coming weeks as demand strengthens in response to economic reopening in North America and, gradually, Europe.
“We remain bullish on crude oil prices amid signs of faster-than-expected demand recovery for petroleum products in key consumer regions such as North America and Asia fuelled by the massive infrastructure packages and economic stimulus” said Vrasidas Neofytou, head of investment research at Exclusive Capital in a blog post.
Under Neofytou’s base case scenario, U.S. crude should hit $70 by the end of the quarter, while Brent should hit $75 a barrel.