Oil prices dipped in early trade on Friday but were on course for a weekly gain of more than 6% with an improved oil demand outlook and strong economic recoveries in China and the United States offsetting concerns about spikes in COVID-19 infections.
U.S. West Texas Intermediate (WTI) crude futures were down 20 cents, or 0.31%, to $63.12 a barrel, after climbing 31 cents on Thursday.
Strong economic recoveries around the world and supply curbs by OPEC and its allies, together called OPEC+, as well as a cautious response to higher prices by U.S. oil producers are supporting the market, said Westpac senior economist Justin Smirk.
“We still think there’s a clear risk prices could rise up to $70 a barrel before we see a more meaningful pull back,” Smirk said.
He said the longer prices stay elevated, the more supply is likely to return to the market, and the risks of COVID-19 cases spiking in places like India and Europe could eventually drive prices down.
For the moment, a strong jump in U.S. retail sales, a drop in unemployment claims and signs of more cars on the road in the world’s biggest economy buoyed the market.
“The reopening of the (U.S.) economy has already seen traffic levels increase in various states across the nation,” ANZ analysts said in a note, adding that India and China are also showing “high levels of congestion.”
Traders are looking ahead to a pick-up in traffic typical in the United States in June through August.
“With miles driven on the U.S. highways up for the first time since the pandemic outbreak, it means we are well on the way to a bountiful U.S. summer driving season that could come close to matching the summer of 2019,” Axi chief global market strategist Stephen Innes said in a note.