Crude oil futures tad lower as market monitors pandemic situation in India

Singapore — 0301 GMT: Crude oil futures were tad lower during the mid-morning trade in Asia May 3, as the market weighed the progress of the pandemic in India against the oil demand recovery in the US and Europe.

At 11:01 am Singapore time (0301 GMT), the ICE Brent July contract was down 8 cents/b (0.12%) from the April 30 settle at $66.68/b, while the June NYMEX light sweet crude contract was down 5 cents/b (0.08%) at $63.53/b.

Concerns over India's debilitating second wave of the coronavirus pandemic remained etched in the market, and continued to drive price movements.

India saw 392,488 new COVID-19 infections and a record 3,689 deaths on May 1, latest data from John Hopkins University showed, even as parts of the country remained under lockdown.

ING analysts, in a May 3 note, referenced preliminary data for Indian fuel demand to showcase the impact of the pandemic. They noted that Indian gasoline demand has fallen 6.3% on the month to 2.14 million mt in April, the lowest level since August, and that Indian diesel demand has fallen 1.7% on the month to 5.9 million mt. ING analysts said that with the pandemic in India still not having reached its peak, further downside to fuel demand could be expected over May.

Vandana Hari, CEO of Vanda Insights, told S&P Global Platts on May 3 that investors are trying to balance demand-destruction caused by the pandemic in India against the resurgence in oil demand seen in the US and in Europe.

"It is tough right now for the market to find a balance between their optimism over the red hot growth in the US and in Europe with the deteriorating situation in India, especially since India is a fast evolving situation," Hari said.

Hari added that with India having no plans right now to impose a full nationwide lockdown, the downside to prices due to India's pandemic situation will remain limited.

Meanwhile, the market has kept an eye on the nuclear deal negotiations between US and Iran that are ongoing in Vienna. Media reports have said that there has been considerable progress towards reaching a deal, with many citing a May 1 tweet from Mikhail Ulyanov, Russia's top representative on the talks, saying that "participants noted today the indisputable progress made at the Vienna talks on restoration of the nuclear deal."

A nuclear deal could see the removal of US sanctions on Iran's oil sector. Iran expects to export as much as 2.5 million b/d of crude after the removal of US sanctions, Platts reported earlier.

Platts analytics has further said that a framework deal by end-May and full sanctions relief by end-September could see Iranian crude production rising to 2.95 million b/d by December 2021.

Market analysts have however, said that the impact of additional Iranian barrels on oil price could be limited, as part of the additional supply is already priced in due to Iran increasing exports to countries such as China over the past few months.