Oil fell on Monday on fears that surging Covid-19 cases in India will dent fuel demand in the world’s third-biggest oil importer, while the end of a force majeure on exports from a Libyan terminal and an expected supply increase from OPEC+ added to pressure.
Brent crude dropped $1.02, or 1.5%, to $65.09 a barrel by 1109 GMT. US West Texas Intermediate (WTI) crude was down $0.9, or 1.5%, at $61.24 a barrel. Both benchmarks fell about 1% last week.
“The market is tending to focus more on the bad news from India and Japan at present, where the number of new coronavirus cases has risen sharply, prompting increased mobility restrictions to be imposed,” said Commerzbank analyst Eugen Weinberg.
Japan is the world’s fourth biggest crude oil importer. India’s new coronavirus infections hit a record peak for a fifth day on Monday as countries including Britain, Germany and the United States pledged to send urgent medical aid to help battle the crisis overwhelming Indian hospitals.
Consultancy FGE expects gasoline demand in India to drop by 100,000 barrels per day (bpd) in April and by more than 170,000 bpd in May. India’s total gasoline sales came to nearly 747,000 bpd in March.
Diesel demand, which at about 1.75 million bpd accounts for about 40% of refined fuel sales in India, may slump by 220,000 bpd in April and by another 400,000 bpd in May, FGE says.
In Japan, a third state of emergency in Tokyo, Osaka and two other prefectures began on Sunday, affecting nearly a quarter of the population as the country attempts to combat a surge in cases of Covid-19.
“It is not clear whether India’s surging cases will be enough to prompt the (OPEC+) group into action (to halt a gradual easing of output restrictions), but the latest increases in cases, particularly in the Asia-Pacific region, are a cause for concern,” said StoneX analyst Kevin Solomon.
The Organisation of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, will discuss output policy at a meeting this week.
The group agreed at a meeting at the start of April to ease production curbs by 350,000 bpd in May, another 350,000 bpd in June and a further 400,000 bpd or so in July.
“The looming wave of fresh OPEC+ supply coupled with renewed demand concerns has dented hopes for a meaningful summer price pounce,” said Stephen Brennock of oil broker PVM.
The prospect of an increase in Libyan oil output also put pressure on prices.
Libya’s National Oil Corporation (NOC) has lifted force majeure on Hariga port after settling a dispute over its budget with the new government, NOC said on Monday.
Libyan oil production fell last week from 1.3 million bpd to about 1 million bpd after the NOC declared the force majeure.