By Geoffrey Smith
Investing.com -- Crude oil prices weakened on Monday, amid concerns that the spiraling problems in India will stop the drawdown of global inventories and delay the market’s return to balance.
By 9:15 AM ET, U.S. crude futures were down 1.3% at $61.36 a barrel, while Brent crude futures were down 1.3% at $64.57 a barrel.
India reported a fifth straight day of record new infections and deaths on Monday, raising the pressure for further lockdown measures, on top of those that have already hit demand in the world’s third-largest importer.
Reuters earlier quoted analysts at FGE as estimating that combined demand for gasoline and diesel could all by some 320,000 a day in April and another 570,000 barrels a day in May as a result of lockdowns and voluntary avoidance of transportation.
By contrast, the so-called OPEC+ bloc of exporters is intending to increase supply to the world market by some 2 million barrels a day over the second quarter (a figure that includes the unwinding of a unilateral 1 million b/d cut by Saudi Arabia).
The simultaneous fall in Indian demand and rise in global supply is likely to weigh on the minds of the OPEC+ bloc when their ministers hold their regular monthly meeting to review output policy on Wednesday.
OPEC’s technical experts, who usually aim to provide a formal recommendation to the ministers, started their virtual meeting earlier Monday. News agencies reported that the Indian issue loomed large in their deliberations.
Downward pressure on prices also came from other sources on Monday, as a squeeze on exports out of Libya appeared to near its end. The National Oil Company of Libya lifted the ‘force majeure’ clause on exports from the port of Hariga, which had been temporarily suspended in an on-off dispute over pay with security staff and others.
Libya’s output had fallen to under 1 million barrels a day as a result of the dispute, from an eight-year high of 1.19 million b/d in March.
There was however, some brighter news from the transport sector that hinted at a recovery in jet fuel demand later in the year, facilitated by the spread of vaccine-linked immunity. Europe’s top bureaucrat Ursula von der Leyen indicated to the New York Times that the EU will allow fully-vaccinated travelers from the U.S. into the bloc, ending a year-long ban on non-essential arrivals. Meanwhile, the cities of Hong Kong and Singapore agreed to restore air links from May 26, in response to falling infection numbers.