Oil reversed course in London, despite a raft of economic data from China adding to signs of recovery from the coronavirus pandemic.
Brent futures have steadily retreated after briefly topping $70 a barrel on Monday, a level the global benchmark has failed to sustain. U.S. crude futures also declined, and trading volumes were below average levels.
China’s industrial output surged in the first two months of the year, underscoring the strength of its V-shaped rebound and reinforcing expectations for increased energy demand.
But there are some less positive signs in the short-term. West Texas Intermediate crude’s nearest timespread flipped into a bearish contango structure — signaling oversupply — after stockpiles in the U.S. grew in recent weeks.
Crude has rallied this year, aided by Covid-19 vaccines and OPEC+ continuing to keep a tight rein on supply. Citigroup Inc. raised its full-year forecast for Brent and is predicting it may even hit $80 a barrel in the next few months. Still, signs of demand recovering have been mixed around the world, and some investors remain cautious.
“The behaviour today, when no market moving news has emerged, could indicate that oil above $70 is now viewed as a take-profit area,” said Ole Hansen, head of commodities strategy at Saxo Bank.
Brent for May settlement slipped 0.7% to $68.73 a barrel as of 12:56 p.m. in London
West Texas Intermediate for April dropped 0.8% to $65.11
China processed more than 14 million barrels a day of crude in January and February, and refiners have kept consumption above that level every month since June. There are also bullish demand signs elsewhere, with U.S. air passenger numbers hitting a 12-month high on Friday, while road use is creeping up in parts of Europe.