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Oil drops towards $66 as India demand concerns weigh

imageCommodities20 minutes ago (May 03, 2021 04:30AM ET)

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(C) Reuters. FILE PHOTO: Oil storage containers are seen, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles

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By Alex Lawler

LONDON (Reuters) -Oil dropped towards $66 a barrel on Monday as concern about demand in India and higher OPEC+ supply offset optimism over rising demand in other major consumers such as China and the United States.

India on Monday reported more than 300,000 new coronavirus cases for a 12th straight day. The new wave of the virus has already led to a drop in fuel sales in the world’s third-largest consumer in April.

Brent crude fell 31 cents, or 0.5%, to $66.45 a barrel by 0815 GMT. U.S. West Texas Intermediate was down 19 cents, or 0.3%, at $63.39.

“There is no doubt that India plays a major role when we talk about oil demand, and the fact that the country is suffering from its worst coronavirus period is making investors nervous about oil prices,” said Avatrade analyst Naeem Aslam.

Scientists predict a peak in India’s infections in the coming days and analysts expect oil demand to take a further hit.

“Given that it still appears as though COVID-19 in India has not peaked, we expect to see further downside to fuel demand over May,” ING analysts said in a report.

Brent has still rallied almost 30% this year, recovering from last year’s historic lows thanks to record supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+.

The OPEC+ group is unwinding more of those cuts. The producers decided last week to stick to a plan to boost supply from May 1 and OPEC’s production climbed in April, led by a boost from Iran, a Reuters survey found. [OPEC/O]

In another development that could allow a further boost in Iranian supply, Tehran and world powers are holding talks to revive the 2015 nuclear deal.

Iran’s chief nuclear negotiator on Saturday said that Tehran expects U.S. sanctions on oil, banks and most individuals and institutions to be lifted.

Oil drops towards $66 as India demand concerns weigh

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