New restrictions aimed at blocking the spread of the virus are expected to reduce demand for transportation fuels in May.
Oil prices fell again as a catastrophic second wave of the coronavirus epidemic in India halted the recovery in oil demand in that country, offsetting optimism about a strong rebound in demand in the countries developed and in China in the second half of the year.
Brent crude futures for July fell 15 cents, or 0.2%, to $ 66.61 a barrel at 2:44 a.m. GMT on Monday, while US West Texas Intermediate for June was at 63.48 $ a barrel, down 10 cents, or 0.2%.
State-level restrictions aimed at stemming infections in India led to lower fuel sales for the world’s third-largest oil consumer in April, preliminary data showed.
“Overall fuel demand is down about 7% from the pre-COVID level of April 2019,” said AK Singh, marketing manager at refiner Bharat Petroleum Corp, adding that demand from India was near pre-COVID-19 levels in March.
Analysts expect India’s demand for transportation fuels to decline more sharply in May due to further restrictions.
“Since it still appears that COVID-19 in India has not peaked, we expect to see a further drop to fuel demand in May,” ING analysts said in a note.
Sunday, a leading body of Indian industry urged authorities to curtail economic activity as the country’s health system has been overwhelmed by the spiral of infections.
With over 300,000 daily cases reported for almost two weeks now, India is battling a fierce second wave of the coronavirus that overwhelmed its fragile and underfunded healthcare system.
Hospitals have been filled to capacity, medical oxygen supplies are depleted, and morgues and crematoriums have been flooded.
With 368,147 new cases in the past 24 hours, the total number of coronavirus infections in India now stands at 19.93 million, while the total number of deaths now stands at 218,959, according to data from the Ministry of health.
Globally, however, the roll-out of vaccination campaigns is expected to increase demand for oil, particularly during peak tourist season in the third quarter, prompting analysts to raise their forecasts for Brent prices for a fifth consecutive month, a Reuters poll showed.
The survey of 49 participants predicted that Brent would average $ 64.17 per barrel in 2021, up from last month’s consensus of $ 63.12 and the average of $ 62.30 for the benchmark so far this year.
On the supply side, the Organization of the Petroleum Exporting Countries (OPEC) pumped 25.17 million barrels per day in April, up 100,000 barrels from March, as Iran and other producers have increased their production. OPEC’s production has increased every month since June 2020 with the exception of February.
Iran and the United States are in talks to revive a nuclear deal that could lead to a lifting of US sanctions that would allow Iran to increase its oil exports.
Washington on Sunday denied a report on Iranian national television that major enemies had struck a prisoner swap deal in exchange for releasing $ 7 billion in Iranian oil revenues frozen by US sanctions in other countries.
In the United States, energy companies added oil and gas rigs last week, resulting in a ninth consecutive monthly increase in rig count as a rally in prices lured some drillers to the well, according to Baker Hughes.
However, U.S. crude oil production fell by more than one million barrels per day in February, to its lowest level since October 2017, according to a monthly government report released on Friday.