Oil Drops Towards $62K as Rising COVID-19 Cases in India Impairs Demand Outlook.
Oil prices edged lower for a second day on Wednesday, weighed down by concerns that surging COVID-19 cases in India will drive down fuel demand in the world’s third-biggest oil importer.
U.S. West Texas Intermediate (WTI) crude futures for June fell 52 cents, or 0.8%, to $62.15 a barrel. The May contract expired on Tuesday down 1.5% at $62.44.
Effect of Rising COVID-19 Cases on Oil Demand
On Wednesday, India, which is the world’s third-largest oil user, reported another record increase in the daily death toll from COVID-19, at 2,023, and another record rise in cases at more than 295,000. The country which is now under lockdown is facing oxygen supply shortages.
“India is a major crude oil consumer. So rising virus cases and thereby restrictions to limit the spread will dampen the demand outlook. Global crude markets remain well supplied with OPEC and its allies scheduled to hike production in coming months. So, if the demand picture does not improve significantly, prices may correct further.” Ravindra Rao, Vice President for Commodities, Kotak Securities.
In Japan, Tokyo and Osaka, the two biggest and economically important cities, will ask the government to declare a state of emergency to contain a surge in cases just three months before the start of the delayed Olympics.
Additionally, data from the American Petroleum Institute (API) industry group showed U.S. crude oil and distillate stocks rose in the week ended April 16, compared with analysts’ forecasts for drawdown in inventories.
The American Petroleum Institute reported crude stockpiles rose 436,000 barrels last week, while gasoline supplies fell more than 1.6 million barrels. If confirmed by government figures Wednesday, that would be the first rise in oil inventories in four weeks.
“This latest COVID surge has wrong-footed more than few traders, who were building long positions ahead of what is expected to be a successful U.S. summer driving season,” said Stephen Innes, chief market strategist at Axi.
The U.S. Energy Information Administration will release its inventory data for last week later on Wednesday.