Crude Plummets Over 2% As Traders Refocus On India's Covid Battle

Still, rampant signs of global demand recovery continue to be reported

Crude traders, who earlier this week put aside their worries about India's rising Covid rates and lifted prices to eight week highs, returned on Thursday to their source of angst and caused prices to fall more than 3 percent - even though analysts have repeatedly stated any demand problems will be short-lived.

Brent crude ended the session down $2.27, or 3.3 percent, at $67.05 per barrel, while West Texas Intermediate settled $2.26, or 3.4 percent, lower at $63.82 per barrel.

Overlooked were signs that India's demand hadn't been stalled by the virus, specifically, Indian Oil Corp. issued three tenders to buy crude for loading in the next two months after a one-month hiatus.

PVM analysts said in a note, “Concerns are growing that the untamed spread of the coronavirus in India and in Southeast Asia will dent oil demand; its impact, however, is expected to be relatively brief and the second half of the year will see the healthy revival of oil demand growth."

Traders were also said to be worried about a broader surge in commodity prices, labour shortages, and much stronger-than-expected consumer prices data this week, because although they reflect a resurgence in demand they may also provoke the U.S. Federal Reserve to raise interest rates.

It is unclear whether the cyber attack on the Colonial Pipeline, a source of trader and analytical worry for the past few sessions, had any impact on Thursday's trading, but the company announced on Thursday morning that “product delivery has commenced in a majority” of markets after it began to restart operations the previous evening; a spokesman said operations should be fully back to normal by the end of the weekend.

Meanwhile, yet another example of an energy company reporting far better than expected economic strength as the world emerges from the pandemic is Japan’s biggest oil and gas explorer Inpex Corp, which on Thursday stated it is forecasting a net profit of 140 billion yen ($1.3 billion) this year, up from its February prediction of 100 billion yen.

Inpex also said its net profit rose 13.7 percent to 38.2 billion yen in the first quarter.

Daisuke Yamada, managing executive officer at Inpex, said, “This will mean a V-shaped earnings recovery from last year, when we were forced to book a hefty net loss as the COVID-19 pandemic hit fuel demand and oil prices.”