India COVID surge drives oil prices down on falling demand fears

India’s rising COVID cases raise fears of new lockdowns, denting fuel demand in the key energy importer.

Oil has risen almost 30 percent in 2021 so far in a stuttering advance [File: David Paul Morris/Bloomberg]

Oil prices were lower as rising coronavirus infections in India and other countries prompted concerns that stronger measures to contain the pandemic will hit economic activity, along with demand for commodities such as crude.

Brent crude was down 17 cents, or 0.3 percent, at $66.60 a barrel by 06:43 GMT on Monday, after rising 6 percent last week. West Texas Intermediate (WTI) United States oil was down 10 cents, or 0.2 percent, at $63.03 a barrel, having gained 6.4 percent last week.

“The progress of vaccination drives in the developed markets can be seen in road traffic levels, but resurging case numbers have reversed the recovery in the emerging countries,” such as India and Brazil, ANZ Research said in a report.

India reported a record rise in coronavirus infections of 273,810 on Monday, increasing overall cases to more than 15 million, making the country the second-worst affected nation after the US, which has reported more than 31 million infections. India’s deaths from COVID-19 rose by a record 1,619 to nearly 180,000.

The Indian capital New Delhi will be under a strict lockdown for six days starting on Monday night, the city’s Chief Minister Arvind Kejriwal said, adding that the healthcare system was at a breaking point because of the worsening COVID-19 outbreak.

Hong Kong will suspend flights from India, Pakistan and the Philippines from April 20 due to imported coronavirus infections, authorities said in a statement on Sunday.

In Japan, which has had far fewer COVID-19 cases than other top economies, companies expect there will be a fourth round of infections, with many bracing for a further blow to business, a monthly poll by the Reuters news agency showed.

Japan’s oil imports in March fell 17 percent from a year earlier to 2.5 million barrels a day, official data showed on Monday.

Oil’s 2021 gains

In the US, energy companies added oil and natural gas rigs for a fifth consecutive week for the first time since February as higher oil prices this year encouraged drillers to return to production.

WTI crude oil futures chart [Bloomberg]

Oil has risen almost 30 percent in 2021 so far in a stuttering advance as progress on vaccines to combat the coronavirus outbreak aids demand, but virus flare-ups in some countries act as a substantial drag.

After the Organization of Petroleum Exporting Countries and its allies presided over supply cuts to drain bloated stockpiles, the cartel now plans to start restoring barrels from May. Still, global COVID-19 cases hit a record last week, casting some doubt on the hope that the end of the pandemic is in sight.

The global picture is mixed, complicating assessments of how energy demand will be affected over the northern hemisphere summer. Highlighting progress, half of people in the US 18 years or older have now received at least one vaccine dose. At the same time, however, the outbreak is rampant in Brazil and India.

“Prices are going through a temporary correction, since demand is proving to be unpredictable,” Will Sungchil Yun, a senior commodities analyst at VI Investment Corp. in Seoul, told the Bloomberg news agency, noting that there were still concerns surrounding a global virus resurgence.

Source: News Agencies