WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved higher in early trade Monday, with the international crude benchmark breaking above $73 barrel (bbl) as market sentiment remains buoyed by expectations of accelerated demand growth in the second half of 2021 amid declining COVID-19 caseloads and improved mobility in key demand centers in India and Brazil.
An upbeat demand outlook led by easing restrictions imposed by the pandemic in some emerging markets along with robust economic activity in the Western Hemisphere lifted crude futures to new highs Monday. Front-month West Texas Intermediate contact rose above $71 bbl and Brent crude advanced $0.68 to trade at $73.37 bbl. NYMEX ULSD traded modestly higher at $2.1256 gallon and the front-month RBOB futures advanced 1 cent to $2.1961 gallon.
Many Indian states, including India's capital New Delhi, scrapped coronavirus restrictions Monday, allowing all commercial activity amid a sharp decline in new COVID-19 infections. At 70,421, India's daily cases fell to a two-month low and are down more than 80% since its May's peak of 414,188.
India, the world's third-largest oil-consuming nation, continued to make a steady recovery from the second wave of COVID-19, with increased mobility across cities leading to greater demand for crude and oil products. Asia's demand remains one of the major pillars in post-pandemic rebound for global oil consumption, with traders keenly monitoring new developments around potential breakouts.
Latin America's largest economy, Brazil, reported its gross domestic product expanded at 1.2% during the first three months of the year, beating forecasts for a 0.7% increase as many declined to hunker down amid a COVID-19 second wave.
"Even with the second wave of the COVID-19 pandemic, GDP grew in the first quarter, given that, unlike last year, there weren't as many restrictions that impeded economic activity in the country,″ the statistics agency's GDP survey coordinator Rebeca Palis said in a statement.
Brazil, where cases remain elevated compared to other regions in the world, managed to bring back its economy to its pre-pandemic level at the start of the year, meaning demand for crude and oil products likely held up earlier this year despite second wave of infections.
Despite encouraging data, the International Energy Agency still revised down its demand projections by 300,000 barrels per day (bpd) for the third quarter, citing inadequate access to the COVID-19 vaccine in much of the developing world. Although post-pandemic recovery has been highly uneven, gains in fuel consumption from leading economies including the United States, European Union and China, are expected to offset laggard growth from emerging markets and developing economies. IEA expects global oil demand to grow at annualized rate of 5.4 million bpd this year and a further 3.1 million bpd in 2022, reaching pre-pandemic level of 100.6 million bpd. Next year, countries outside of the Organization for Economic Cooperation and Development will account for 1.8 million bpd of that growth compared with 1.3 million bpd coming from OECD.
Separately, oil traders are also keenly monitoring a sixth round of multilateral nuclear talks in Vienna, aimed at reviving the 2015 Joint Comprehensive Plan of Action that could lead to a lifting of sanctions on Iran's oil exports. Over the weekend, Russian diplomats cautioned that negotiations with Tehran still need more time despite Biden's administration lifting some sanctions on Iran's officials and energy companies. Group of Seven leaders reaffirmed Sunday commitment to stop the Islamic republic from building nuclear weapons.
Liubov Georges can be reached at firstname.lastname@example.org