India Inspires Another Round Of Crude Losses, Buffered By OPEC

Analysts assess to what extent rising Covid rates will affect demand recovery: File Image/Pixabay

India's battle with rising Covid rates continued to negatively affect crude trading patterns on Monday, although the Organization of the Petroleum Exporting Countries (OPEC) reportedly willing to adjust its production policy to address possible demand impact was said to minimize losses.

Brent settled 46 cents lower at $65.65 per barrel, while West Texas Intermediate ended down 23 cents at $61.91 per barrel.

FGE expects gasoline demand in India to drop by 100,000 barrels per day (bpd) in April and by more than 170,000 bpd in May; the country's total gasoline sales came to nearly 747,000 bpd in March.

FGE added that diesel demand may slump by 220,000 bpd in April and by another 400,000 bpd in May.

While acknowledging the problems Covid is causing in the market, John Kemp, commodities analyst for Reuters, noted on Monday that "Crude oil prices are already at or slightly above their long-term average in real terms, which is consistent with a market in the early or mid stages of a cyclical upswing."

He went on to state that higher prices would probably trigger accelerated production from the U.S. and faster production increases from OPEC, "ensuring prices become progressively unstable above $70."

Still, analysts are worried that India's situation could contribute to either a longer global demand recovery period than originally thought, or spotty demand recovery: "The news, particularly in the U.S., is looking a lot better, making people optimistic," said Michael Lynch, president of Strategic Energy & Economic Research, "But there's still so much trouble in India it's uncertain how far prices can really go."

Meanwhile, Bloomberg reported both good news and bad news on Monday concerning the world's major oil producers: the good news is that they are finally generating spare cash, but the bad news is it will likely go toward paying off debt rather than into the hands of investors.

The agency stated, "For Exxon Mobil Corp. and Total SE, which bore the financial strain of maintaining shareholder payouts last year, any extra cash will go to easing debt; Chevron Corp. and Royal Dutch Shell Plc have said they want to resume buybacks, but not yet.

"Only BP Plc is dangling the possibility that shareholder returns could improve soon, after a year and a half of flip-flopping over its payout policy."