Oil dropped towards $66 a barrel early this week as concern about demand in India and higher OPEC+ supply offset optimism over rising demand in other major consumers such as China and the United States.
However, on Monday this week, crude oil prices climbed as optimism about a strong rebound in fuel demand in developed countries and China in the second half of the year overshadowed growing concerns of a full lockdown in India to curb the COVID-19 pandemic.
Brent crude futures for July gained 36 cents, or 0.5%, to $67.12 a barrel while US West Texas Intermediate for June was at $63.94 a barrel, up 36 cents, or 0.6%.
Vaccinations are expected to lift global oil demand, especially during peak travel season in the third quarter, prompting analysts to increase their forecasts for Brent prices for a fifth straight month, a Reuters poll showed.
India, reported more than 350,000 new coronavirus cases in a single day. The new wave of the virus has already led to a drop in fuel sales in the world’s third-largest consumer in April. Soon after the hike, Brent crude fell 31 cents, or 0.5%, to $66.45 a barrel while US West Texas Intermediate was down 19 cents, or 0.3%, at $63.39.
India plays a major role in projections about oil demand. The fact that the country is suffering from its worst coronavirus period is making investors nervous about oil prices, analysts aver. Scientists have predicted a peak in India’s infections in the coming days and analysts expect oil demand to take a further hit.
“Given that it still appears as though COVID-19 in India has not peaked, we expect to see further downside to fuel demand over May,” ING analysts said in a report.
Brent has still rallied almost 30% this year, recovering from last year’s historic lows thanks to record supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+.
The OPEC+ group is unwinding more of those cuts. The producers decided last week to stick to a plan to boost supply from May 1 and OPEC’s production climbed in April, led by a boost from Iran, a Reuters survey found.