Crude oil falls below $62 per barrel amid India’s Covid-19 spike

Oil fell as India’s worsening Covid-19 crisis weighed on the near-term outlook for demand ahead of a key OPEC+ meeting later this week.

Futures in New York slid below $62 a barrel after advancing 1.2% on Friday, the most in more than a week. The market is facing headwinds from a virus flare-up in India, despite China and the U.S. recovering strongly from the pandemic and some positive signs emerging from Europe.

That could pose a problem for the OPEC+ alliance, which has agreed to start adding more supply from May.

Signs of strain on India’s refiners are starting to emerge. Mangalore Refinery & Petrochemicals Ltd. has cut processing rates, while Indian Oil Corp. has so far failed to issue an expected tender to purchase West African crude.

Oil’s robust start to the year faltered in mid-March as some regions started to see a virus resurgence, although prices are still up almost 30% in 2021. Despite additional barrels set to hit the market next month, global benchmark Brent is firming in a bullish backwardation structure, signaling little concern about fresh supply. OPEC+ is scheduled to hold its meeting on Wednesday.

Another wildcard is the prospect of more crude flows from Iran as the nation seeks to revive a nuclear deal and free itself of U.S. sanctions, but talks are ongoing and progress on a solution remains uncertain.

The prompt timespread for Brent was 70 cents a barrel in backwardation — where near-dated contracts are more expensive than later-dated ones. That compares with 40 cents at the start of April.

There are signs of a broader recovery, despite the challenges presented by the Indian crisis.

The chief executive officer of top oilfield contractor Schlumberger forecast global oil demand should return to pre-pandemic levels by the end of next year, if not sooner, while China’s economy continued to boom in April from the record growth in the first quarter.