Oil falls but heads for strong weekly gain on demand growth
Both benchmark contracts were headed for gains of around 2% for the week
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Oil prices fell on Friday but were on track to post solid gains for the week with demand growing faster than supply, while vaccinations dampen the impact of a resurgence in coronavirus cases worldwide.
Brent crude futures for September, which expires on Friday, fell 45 cents, or 0.6%, to $75.60 a barrel by 0506 GMT, following a 1.75% jump on Thursday.
The more active Brent contract for October was down 48 cents, or 0.6% to $74.62 per barrel.
U.S. West Texas Intermediate (WTI) crude futures fell 43 cents, or 0.6%, to $73.19 a barrel, whittling down a 1.7% rise from Thursday..
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Both benchmark contracts were headed for gains of around 2% for the week, buoyed by indications of tight crude supplies and strong demand in the United States, the world's biggest oil consumer.
"We've got stronger prices for a bit longer now, because it's a fundamental supply-demand issue in terms of the recovery in demand we're seeing in places like the United States," said Justin Smirk, senior economist at Westpac.
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U.S. crude and gasoline inventories fell sharply in the latest week, with crude stocks at Cushing at their lowest since January 2020, reflecting strong demand growth. ANZ analysts noted even jet fuel consumption in the country had hit its highest level since March 2020.
Even with coronavirus cases rising in the United States, all around Asia and parts of Europe, analysts said rising vaccination rates would limit the need for the harsh lockdowns that gutted demand during the peak of the pandemic last year.
"I think the risks of the large shutdowns we saw last year are much lower," Smirk said.
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Analysts point to a rapid rebound in India's gasoline consumption and industrial production following its COVID-19 surge earlier this year as a sign that economies are more resilient to the pandemic.
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"Yes, Delta is a risk, but is it going to derail demand growth in the second half? We may not see that," said Commonwealth Bank commodities analyst Vivek Dhar.
(Reporting by Sonali Paul; Editing by Christopher Cushing)