Renewed Indian COVID-19 Worries Dampen Oil Prices
By Adedapo Adesanya
Oil prices took a beating on Friday, April 30 as previous bullish trends were hammered by concerns of wider coronavirus situations in India and Brazil backed by a decline in crude import in Japan.
Brent crude futures closed $1.31 or 1.91 per cent lower to $67.25 per barrel, while the West Texas Intermediate (WTI) crude futures dipped 1.49 or 2.29 per cent to $63.55 per barrel.
India, the world’s third-largest oil consumer, is in a deep crisis, with hospitals and morgues overwhelmed as the number of COVID-19 cases continues to set daily records.
On Friday, the South Asian country reported over 400,000 new daily coronavirus cases, the first time the figure has been surpassed since the pandemic began.
According to reports, thousands of Indians jostle for hospital beds and life-saving oxygen for sick relatives. Hospital beds that become available, especially in intensive care units (ICUs), are occupied within minutes.
Brazil is also facing a similar situation as it has recorded 100,000 deaths between March and April, which were the worst months in the country. Since the start of the pandemic, Brazil has had more than 14.5 million cases. Now, protests are springing in the South American country.
Also depressing the market, data from Japan, another major crude oil importer showed that imports fell 25 per cent in March from a year earlier to 2.34 million barrels per day.
These events helped pull previous optimistic signals to the background such as wider adoption of COVID-19 vaccinations, which is expected to make travelling better as it will lift oil demand.
In addition, several US cities are emerging from lockdown stoking confidence of stronger demand ahead of the summer, known for its high rate of driving.
The upcoming Workers Day holiday in China would also boost fuel demand at the world’s second-largest oil consumer.
Despite the bearish environment, Brent gained more than 7 per cent in April while WTI recorded close to 10 per cent making it the fifth monthly gain out of the last six following demand almost returning to pre-pandemic levels.
The Organisation of the Petroleum Exporting Countries and its allies (OPEC+), responsible for more than a third of global production, has cut output by around 8 million barrels per day, equivalent to over 8 per cent of global demand. The reduction includes a 1 million barrels per day voluntary cut by Saudi Arabia.
However, from May, the group will bring 2.1 million barrels per day back to the market from till July, easing cuts to 5.8 million barrels per day.
Saudi Arabia will also begin to unwind an extra voluntary cut it made in February, March and April.
The extra Saudi cut means OPEC still pumped much less than called for under the OPEC+ deal in April. Compliance with pledged cuts was 123 per cent compared to 124 per cent in March.
Iran, plus fellow OPEC members Libya and Venezuela, are exempt from making cuts, so changes in their output do not affect the compliance rate.