Oil declined as the coronavirus crisis in India and a slowing demand rebound in the U.S. highlighted the uneven nature of the global recovery.

Futures in New York fell 1.4 per cent Thursday after hitting a nearly two-month high earlier in the week. While signs of rising oil consumption have put prices on track for a weekly gain, spiking COVID-19 cases in major crude importer India is capping gains. At the same time, U.S. gasoline consumption slipped for a second straight week.

“What’s keeping the market from going higher are these COVID-19 issues in several countries along with not quite enough of a demand rebound here in the U.S. to juice prices toward that US$70-a-barrel mark,” said John Kilduff, founding partner at Again Capital LLC.

Despite near-term concerns, oil has rallied more than 30 per cent this year as key economies including the U.S. and China rebound from the depths of the pandemic. Spain’s Cepsa is restarting a processing unit that was previously idled, while U.S. refineries are running at five-year average levels for the first time since the pandemic began. The strength in crude has helped drive the Bloomberg Commodity Spot Index to the highest level in almost a decade.

Prices:

• West Texas Intermediate crude for June delivery fell 92 cents to US$64.71 a barrel in New York.
• Brent for July settlement slid 87 cents to US$68.09 a barrel.

The promise of a summer travel boost is also keeping prices supported, said Bob Yawger, head of the futures division at Mizuho Securities. “With Memorial Day weekend so close here, the gasoline demand scenario is just too strong to see crude oil fall apart.”

Elsewhere, Japan plans to extend a state of emergency brought on by COVID until the end of the month, local media reported. The country’s capital, Tokyo, had wanted to extend it in a bid to stem a surge in infections ahead of hosting the Olympics from July.

Beyond headline crude prices, the market’s underlying structure has weakened in recent sessions. The backwardation between Brent’s two nearest contracts -- which signals tightening supplies -- has narrowed since the end of last week. The backwardation in WTI’s so-called prompt spread has also softened compared to last Friday.

Related news:

• The dislocation of key crude benchmarks is providing a snapshot of the uneven demand recovery unfolding across global markets.
• Iraq is carving out a mediating role between Iran and Gulf Arab oil producers including Saudi Arabia, a shift for a country better known as a victim of regional conflict than a conduit to defuse it.