On Monday, oil prices fell on fears that surging COVID-19 cases in India will drive down fuel demand in the world’s third-biggest oil importer and as investors adjusted positions ahead of a planned increase in OPEC+ output from May.
U.S. West Texas Intermediate (WTI) crude futures were down 31 cents, or 0.5%, at $61.83 a barrel, after rising 1.2% on Friday.
Rising Concern of Effect of High COVID-19 Cases on Oil Demand
According to Johns Hopkins University data, the number of COVID-19 cases in India, the world’s third-largest oil importer, topped 16.9 million as of April 26.
“Market sentiment was dented on worries that surging number of COVID-19 cases in some countries, especially in India, will slash fuel demand,” Kazuhiko Saito, Chief Analyst, commodities broker Fujitomi Co.
On Sunday, Prime Minister Narendra Modi urged all citizens to be vaccinated and exercise caution, saying the “storm” of infections had shaken India. The country set a new global record for the most COVID-19 infections in a day.
Japan, the world’s fourth-largest fuel importer, declared a third state of emergency in Tokyo, Osaka and two other prefectures on Sunday, affecting nearly a quarter of the population as the country attempts to combat a surge in cases.
Following the high volatility experienced in the oil market, investors shifted their funds from the oil market to the grain market.
Last week, Chicago corn, wheat and soybeans hit multi-year highs as concerns over cold weather damage to crops across the U.S. grain belt underpinned prices, along with expectations for more use of agricultural products for biofuels.
The Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, will hold a largely technical meeting this week, with major changes to policy unlikely.
A technical committee meeting is set for Monday, where market fundamentals and compliance with production cuts will be discussed. The producer group surprised the market at its April 1 meeting by agreeing to gradually ease record cuts in oil output.
U.S. energy firms, meanwhile, cut the number of fuel rigs operating for the first time since March, as rigs fell by one to 438 last week, according to energy services firm Baker Hughes Co (BKR.N).