Oil futures ended lower on Tuesday as record cases of COVID-19 in India dimmed the outlook for the nation’s economy and energy demand.
Prices also declined on apparent progress in the Iran’s nuclear deal negotiations and after the U.S. House Judiciary Committee cleared a bill that would leave the Organization of the Petroleum Exporting Countries open to antitrust lawsuits over production cuts.
That confluence of factors erased earlier support for oil from a halt to crude exports from a Libyan port and overall weakness in the U.S. dollar.
India on Tuesday reported its worst daily death toll of the pandemic, with large parts of the country now under lockdown amid a fast-rising second wave of infections. India’s Prime Minister Narendra Modi held an address to the nation on Tuesday, which fed concerns surrounding India’s struggle to contain the virus.
Modi, however, ruled out a nationwide lockdown as a measure to curb the pandemic and urged states to ensure that lockdowns are only chosen as the last resort, according to the Hindustan Times.
Still, oil got hit with a “triple whammy of bearish news,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
In addition to worries about India, the European Medicines Agency said its safety committee concluded that a warning about unusual blood clots with low blood platelets should be added to the product information for Johnson & Johnson’s coronavirus vaccine, but said the benefits outweighed the risk.
Meanwhile, there are reports of “progress being made in the Iranian nuclear talks,” said Flynn. Iran’s President Hassan Rouhani said negotiations toward a nuclear deal were 60% to 70% complete, Bloomberg reported Tuesday. That could lead to a deal to lift U.S. sanctions, which would allow more oil to enter the global market.
West Texas Intermediate crude for May delivery
fell by 94 cents, or 1.5%, to settle at $62.44 a barrel on the New York Mercantile Exchange, on contract’s expiration day. The most-active June WTI
contract, which became the front month at the end of the session, lost 76 cents, or 1.2%, to settle $62.67 a barrel.
Tuesday marked the one-year anniversary of a negative price close for the front-month WTI crude futures contract. On April 20, 2020, the soon-to-expire May WTI crude dropped 306%, or $55.90, to settle at negative $37.63.
“Now a year later, the strength of the market is a reminder of how low prices can cure low prices,” said Flynn.
June Brent crude
the global benchmark, fell 48 cents, or 0.7%, at $66.57 a barrel on ICE Futures Europe on Tuesday.
The U.S. House Judiciary Committee’s move on the No Oil Producing and Exporting Cartels Act of 2021, known as NOPEC, called attention to long-running efforts to by the U.S. to make it illegal for OPEC to manipulate oil prices. The NOPEC bill “would make it illegal for any foreign state to act collectively to limit oil production or set prices,” said Justin McQueen, analyst at DailyFX, in a note.
The bill has a long way to go before it potentially becomes a bill signed into law. The Price Futures Group’s Flynn said he doubts it will have “any real impact in the short run.”
Overall weakness in the dollar for the month so far helped to underpin oil early Tuesday, in addition to forecasts for the latest report on U.S. crude inventories to show a decline as the world’s largest consumer of oil, the U.S., reopens its economy, said Sophie Griffiths, a market analyst at Oanda, in a note.
Still, risks remain, with the resurgence of COVID in India, the world’s third-largest importer of oil, “tighter lockdown restrictions could dent the near-term demand outlook for oil,” she said.
India reported its worst daily death toll on Tuesday, with the health ministry reporting 1,761 deaths in the past day and 259,170 new infections, according to Reuters.
On Monday, Libya’s National Oil Corporation declared force majeure on crude oil exports from the eastern port of Hariga, with a subsidiary, Agoco, forced to reduce its output due to lack of funding, said Warren Patterson, head of commodities strategy at ING, in a note.
The disruption could see the country’s output fall by 280,000 barrels a day, taking it below 1 million barrels a day for the first time since October, he said.
May natural gas
settled at $2.73 per million British thermal units, down 0.4%.
The Energy Information Administration will release its report Wednesday on U.S. petroleum supplies for the week ended April 16.
On average, analysts expect the EIA to report a decline of 4.4 million barrels for crude inventories, along with an increase of 800,000 barrels for gasoline supplies and a fall of1.3 million barrels for distillates, according to a survey conducted by S&P Global Platts.