Oil slips in fragile rally as market struggles for direction

Oil edged lower in Asian trading as the market struggled for direction amid mixed signals for demand following a recent rally to levels last seen before the worst of the Covid-19 pandemic.

Futures in New York are poised for a modest weekly loss after a volatile week that saw prices briefly hit the highest level in more than two years. Near-term signs are pointing to rising fuel consumption from America to the UK, while a huge US stimulus package lifted sentiment. OPEC, however, sounded a note of caution in the outlook, trimming its estimates for the amount of crude it will need to pump over the next two quarters.

“The latest rally is starting to feel fragile,” said Vandana Hari, founder of Vanda Insights in Singapore. “Once sentiment from the US stimulus moves into the rearview mirror, we could return to inflation worries and skittish financial markets. That casts a bearish shadow on the oil complex.”