Oil down on Global Covid, ‘NOPEC’ Threat & Stocks Selloff
By Barani Krishnan
Investing.com – Oil prices fell as much as 2% on Tuesday amid fears that major oil consumers in India and Japan will reappear, stock markets will sell out, and US legislation seeks to curb OPEC’s setting of production prices.
“There are a number of things going on, and none of them is too good for oil,” said John Kilduff, founding partner of New York energy hedge fund Again Capital.
New York-Traded, the benchmark for U.S. crude oil, fell $ 1.16, or 1.8%, to $ 62.27 a barrel by 12:12 p.m. ET (4:12 PM GMT). It fell to $ 61.54 at the start of the session.
The global benchmark index for crude oil traded in London fell 86 cents, or 1.3%, to $ 66.19. Brent had previously hit a session low of $ 65.54.
The number of confirmed cases of the coronavirus-borne disease COVID-19 rose to over 142 million on Tuesday, with India ranking second after the US with more than 15 million cases.
India, the third largest consumer of crude oil after China and the US, has recorded more than 250,000 new infections and over 1,700 deaths in the last 24 hours alone, raising serious concerns about the mobility of its 1.4 billion people and their energy needs as cities in the country fell like ten pens in locks.
Japan, the fifth largest energy consumer in the world, has tightened its regulations on coronavirus test certificates that must be submitted by all passengers upon arrival at Japanese airports, with those who do not meet the required conditions must be refused entry into the country as a matter of principle.
The Japanese and Indian governments have decided to postpone their foreign and defense ministerial talks planned this weekend in Tokyo due to the Covid situation.
A sell-off in the equity markets compounded investor sentiment, with US technology stocks falling the hardest since a month ago.
If that was not enough, a US Legislative Assembly body reportedly passed a law opening up the OPEC oil exploration group and countries that work with it to lawsuits over collusion to boost oil prices.
The so-called NOPEC bill, introduced by Republican Steve Chabot, was passed with one vote in the House Judiciary Committee. Similar bills against organizing the petroleum exporting countries when oil prices rise have appeared unsuccessfully in Congress for more than 20 years. However, it was uncertain whether the legislation would be scrutinized by the entire US House of Representatives.
Regardless, later in the day, oil trading will be looking for an idea of what last week’s crude and petroleum stocks might have come from an inventory snapshot from the API or the American Petroleum Institute.
The API snapshot, due to be released at 4:30 p.m. ET (8:30 p.m. GMT), will be released ahead of the US Energy Information Administration’s official Wednesday report on the supply and demand of petroleum products for the week ending April 16.
According to an analyst consensus tracked by Investing.com, US crude oil is likely down 2.9 million barrels last week, compared to the 3.5 million barrels decline the week before April 9.
Consensus suggests that the rise is likely to be 650,000 barrels higher than the 309,000 rise in the previous week.
And diesel inventories, which probably fell 898,000 barrels last week, after falling 2.08 million barrels a week earlier.