Oil prices fell more than 2 percent on Thursday as India’s coronavirus crisis deepened and a key US pipeline resumed operations, halting a rally that had lifted crude to an eight-week high after the IEA and OPEC forecast a rebound in global demand later in the year.
Brent crude was down $1.75, or 2.5 percent, at $67.57 a barrel by 1315 GMT, after rising 1 percent on Wednesday. West Texas Intermediate (WTI) was down $1.80, or 2.7 percent, to $64.28 a barrel, having risen 1.2 percent in the previous session.
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“The path for crude prices appears to be higher but until the situation improves in India, WTI will probably struggle to break above the early March high,” Edward Moya, senior market analyst at OANDA, said in a note.
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If those losses are sustained, both contracts would mark their biggest daily drops in percentage terms since early April.
In a bearish signal for oil demand, a variant of the coronavirus has swept through the countryside in India, the world’s third-biggest importer of crude.
Medical professionals have not been able to say when new infections will plateau and other countries are alarmed over the transmissibility of the variant that is now spreading worldwide.
Meanwhile, fuel shortages worsened in in the southeastern United States, six days after the shutdown of the Colonial Pipeline, the largest US fuel pipeline network.
“Concerns are growing that the untamed spread of thecoronavirus in India and in Southeast Asia will dent oildemand,” PVM analysts said in a note.
“Its impact, however, is expected to be relatively brief andthe second half of the year will see the healthy revival of oil demand growth.”
Colonial, which pumps more than 2.5 million barrels per day of fuel, said it hoped to get a large portion of the network operating by the end of the week.
“While the disruption is meaningful for local retail markets, its impact is still likely to be transient as there is no physical damage to the pipeline,” Goldman Sachs analysts said.
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