Oil futures fell Monday, losing ground as investors continued to monitor rising COVID-19 cases in India and other countries ahead of a meeting later this week of the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+.
West Texas Intermediate crude for June delivery
fell 90 cents, or 1.4%, to $61.24 a barrel on the New York Mercantile Exchange. June Brent crude
the global benchmark, was off $1.04, or 1.6%, at $65.07 a barrel on ICE Futures Europe.
“A concern for the market is the surge in Covid-19 cases in India, where the number of daily cases has hit a record of almost 350,000. While the government has not imposed a national lockdown, we are instead seeing regional restrictions, so the impact on oil demand at least for now will not be as severe as we saw during the national lockdown last year,” said Warren Patterson, head of commodities strategy at ING, in a note.
“However, there will clearly be some impact, and some refiners in the country are already reacting to weaker fuel demand by reducing run rates,” he said.
India is recording more than a third of all new COVID-19 cases globally each day, or an average of more than 260,000 daily in the last week. India has suffered 195,123 deaths, according to its official numbers, or fourth-highest in the world, although those numbers are understood to be underreported.
Uncertainty over the demand outlook will be a topic for discussion when OPEC+ officials meet this week. They will also need to weigh the possible outcome of the Iranian nuclear talks and the potential return of the country’s crude output to the market, Patterson said.
ING assumes Iranian supply could return to 3 million barrels a day by the end of the year, up from around 2.3 million barrels a day at present, but the firm’s balance sheet still shows the market would draw down inventories, he said, indicating that while Iran headlines could dent sentiment, the development might not prove as bearish as it first appears.