By Adedapo Adesanya
Oil prices went southwards by 1 per cent on Thursday, May 6 as rising COVID-19 infections in India renewed concerns on the impact of fuel demand.
As a result, the price of the Brent crude went down by 75 cents or 1.09 per cent yesterday to $68.21 per barrel, while the United States crude benchmark lost 77 cents or 1.17 per cent to trade at $64.86 per barrel.
India posted another record daily COVID-19 infections and deaths, with the virus spreading from cities to villages across the world’s second-most populous nation, dashing hopes that the country’s deadly second wave was about to peak. On Thursday, India reported more than 400,000 new cases of infections in 24 hours.
The market focused on the potential slowdown in demand recovery that could come from the South Asian country, and after the run to the goal of $70 per barrel, which failed on Wednesday, some profit-taking took place on Thursday.
India as the third-largest consumer of oil has some say in how demand affects prices and as the county continues to come under the pressure of rising cases, it is coinciding with the gradual pumping of more oil into the market by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+).
There is also a growing concern about rising Iranian supply, which is exempt from production cuts along with Libya and Venezuela, as it continues to increase output as its sanctions may be lifted following the success of ongoing talks.
OPEC’s production showed that the group’s output averaged 25.17 million barrels per day in April, up 100,000 barrels per day in March, largely driven by Iran, with output increasing by 200,000 barrels per day to 2.5 million barrels per day over the month.
The market is still not satisfied even after improvements in other parts of the world such as Europe where easing of coronavirus restrictions have led to a pick-up in fuel demand. The roll-out of vaccines in Europe and the US continue to strengthen the market and as improved demand are expected due to increased use of fuels in the summer driving season, the recovery may outweigh other bearish signals.
Support also came from crude stockpiles falling more than expected last week according to data from the Energy Information Administration (EIA) on Wednesday. Crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, compared with expectations of a 2.3 million barrel drop.
Modupe Gbadeyanka