Oil prices dropped early on Monday amid soaring coronavirus cases in major oil importer India, less than a week before the OPEC+ group is set to increase global oil supply.
As of 10:05 a.m. EDT on Monday, WTI Crude was trading down 1.53 percent at $61.27, and Brent Crude was down by 1.59 percent at $65.12.
Discouraging news about immediate fuel demand in India continues to weigh on oil prices, as the world’s third-largest oil importer reported on Monday a record number of new cases for the fifth day in a row, while death toll numbers are soaring amid shortages of oxygen and a lack of hospital beds.
Analysts and refining sources say that demand for fuel in India has already started crashing this month, as the record COVID cases lead to tightening restrictions. India’s combined demand for diesel, the most used fuel in the country, and for gasoline is set to plunge by as much as 20 percent in April compared to March, officials from refiners and fuel retailers told Bloomberg last week.
India could throw a wrench in the recovery of global oil demand and offset possible higher fuel consumption in Europe, where more countries started re-opening this week. After England eased restrictions on April 12, Italy and Scotland opened restaurants, bars, and non-essential retailers on April 26.
The worsening pandemic situation in India will likely be a topic for discussion at this week’s OPEC+ meeting, which is expected to only be a formality and a technical meeting to take stock of the market balances and compliance with the cuts. Most analysts think it is unlikely the group to make any material changes to the plans to ease the production cuts over the next three months.
“While some OPEC+ members may be concerned about the situation in India, we do not believe that the group will drift from its policy of easing output from 1 May,” ING strategists Warren Patterson and Wenyu Yao said on Monday.
“Despite the prospect for additional OPEC+ barrels hitting the market next month, a firming backwardation in Brent, the global benchmark, still points to a market that can absorb additional supply as fuel demand continues to grow into the second half,” Saxo Bank analysts said today.