(Bloomberg) Oil fell as India’s worsening Covid-19 crisis weighed on the near-term outlook for demand ahead of a key OPEC+ meeting later this week.Futures in New York slid 1.7% toward $61 a barrel. Signs of strain on India’s refiners are starting to emerge. Mangalore Refinery & Petrochemicals Ltd. has cut processing rates, while Indian Oil Corp. has so far failed to issue an expected tender to purchase West African crude. IOC is also looking to sell gasoline, in a rare offer that points to the weakening state of demand in the country.The risk in India comes despite China and the U.S. recovering strongly from the pandemic and some positive signs emerging from Europe. It could also pose a problem for the Organization of Petroleum Exporting Countries and its allies, which has agreed to start adding more supply from May.
Oil’s robust start to the year faltered in mid-March as some regions started to see a virus resurgence, although prices are still up almost 30% in 2021. Despite additional barrels set to hit the market next month, global benchmark Brent is firming in a bullish backwardation structure, signaling little concern about fresh supply. OPEC+ is scheduled to hold its meeting on Wednesday.
“The latest surge of Covid-19 infections in India prompted a swift return of pandemic-related demand fears,” said PVM Oil Associates analyst Stephen Brennock. “Optimism of a sustained recovery in fuel demand has hit a snag.”
West Texas Intermediate for June fell 1.7% to $61.08 a barrel at 10:14 a.m. London time
Brent for June settlement dropped 1.7% to $65.01
Despite the weakness in India, parts of the futures curve remain strong. Brent’s nearest timespread closed in its strongest backwardation — a structure that indicates tight supply — since late-February on Friday, while WTI’s was the firmest since early March.
Meanwhile, negotiations continue over the future of the Iran nuclear deal, which has the potential to add extra supply to the market later in the year. Iran said the U.S. must lift sanctions on some 1,500 individuals to fix the accord.
Other oil-market news:
Russia is poised to export the most of its flagship Urals crude in more than a year from its three main western ports as OPEC+ constraints on the country’s output gradually ease.
Californian Governor Gavin Newsom will ban new hydraulic fracturing permits in the coming years as the state pushes to eliminate net greenhouse-gas emissions by 2045.
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