Oil prices dipped on Monday afternoon, in what is regarded as one of the worst trading days for the commodity since sometime in May 2020 when WTI slipped into negative territory.
WTI was trading down 5.22% by around 2 p.m. on Monday, $3.24 per barrel down for the day at $58.21 before hitting $58.95 late on Monday night. The Brent benchmark was trading down 4.81% on the day, or $3.12 down per barrel at $61.79 and later ended at $62.38 on Monday night.
The volatility of oil prices can be attributed to fears over oil demand, as the UK announced earlier in the day that the ban on international travel would likely go on beyond May 17 if the infection rate of the coronavirus disease continued to rise globally.
Also heavily impacting on oil prices is a spike in Covid-19 cases in India, a major importer. On Monday, India reported the highest number of new daily Covid-19 cases since the pandemic began, triggering a lockdown in its largest city, Mumbai. This could threaten crude oil demand.
Another area of concern is that there could possibly be an increase in crude oil supply by Iran if its negotiation with the US in their upcoming meeting later this week turns out successful. It should be noted that Iran has been hit by US sanctions over the nuclear deal.
In case you missed it
- It can be recalled that OPEC+, in a surprising move, decided to ease production cuts as it plans to ramp up oil production from May. While the general consensus is that the market will absorb the additional barrels, most analysts had anticipated a rolling over of the current level of production cuts.
- Despite this market shock last week, prices did not immediately react. However, it is yet to be seen whether it was a wise move in the face of fragile demand recovery.