With the world slowly opening up for business, oil prices are up again after April’s downward spiral, when demand almost vanished in a world under lockdown.
The international benchmark Brent crude was trading at $38.94 per barrel on Wednesday, and West Texas Intermediate (WTI) was at $36.27 per barrel at the time of going to press. Brent crude hit a 21-year low and US oil futures slumped to negative for the first time as the glut overwhelmed the world’s limited storage facilities, triggering a wave of selling by traders in April. The prices have been up, supported by a gradual recovery in fuel demand, as the global economy began to reopen.
“Dated Brent Prices may find pockets of support in June in the range of $35-40/bbl as supply shut-ins peak, demand recovers, and OPEC+ maintains discipline at their June 10 meeting,” S&P Global Platts Analytics wrote in a report.
The cost of the Indian basket of crude, which comprises Oman, Dubai and Brent crude, averaged $56.43 and $69.88 per barrel in FY18 and FY19, respectively. It was $19.90 in April, according to data from the Petroleum Planning and Analysis Cell. The price was $38.66 a barrel on 2 June.
India’s largest refiner, Indian Oil Corp. Ltd (IOC) said demand for petroleum products is picking up in India.
Energy consumption, especially electricity and refinery products, is typically linked to overall demand in an economy. India’s power demand, which had nosedived during the lockdown, is slowly getting back to pre-lockdown levels.
“Asia has also been hit hard by the economic slump despite the opportunity to be first in line to recover from the Covid-19 pandemic among all major regions around the world. India in particular saw the worst year on year demand destruction in history last month, bringing Asia’s April demand down by 5 million b/d year on year together with demand destruction in Southeast Asia, before it improved in May,” the report added.
“However, risks of 2nd wave hits of Covid-19 globally have also increased. It is particularly challenging for Latin America, the Middle East and Africa, and to a lesser extent South Asia,” the S&P report added.