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James Hyerczyk
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WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil traders will be eyeing the possibility of new developments from OPEC and its allies as the group known as OPEC+, is scheduled to discuss output policy at a meeting later this week.

Other events that could influence the price action are demand concerns over the resurgence of coronavirus in India, supply worries in Libya and U.S. crude, gasoline and distillate supplies.

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Surging COVID-19 Cases in India Could Dent Fuel Demand

OPEC and its allies are watching surging COVID-19 cases in India, which may dent fuel demand in the world’s third-biggest oil importer.

The OPEC+ joint technical committee (JTC) has kept its forecast for growth in global oil demand this year, but is concerned about surging COVID-19 cases in India and elsewhere, three sources from the producer group told Reuters.

The group agreed at a meeting at the start of April to ease production curbs by 350,000 barrels per day (bpd) in May, another 350,000 bpd in June and a further 400,000 bpd or so in July.

Meanwhile, conditions are worsening in India, which has ordered its armed forces to help tackle surging new coronavirus infections that are overwhelming hospitals, as countries including Britain, Germany and the United States pledged to send urgent medical aid.

Consultancy FGE expects gasoline demand in India to drop by 100,000 barrels per day (bpd) in April and by more than 170,000 bpd in May. India’s total gasoline sales came to nearly 747,000 bpd in March.

Diesel demand, which at about 1.75 million bpd accounts for about 40% of refined fuel sales in India, may slump by 220,000 bpd in April and by another 400,000 bpd in May, FGE says.

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New Supply Pressures from Libya

Traders will also be watching the possibility of new supply pressures from Libya due to the end of force majeure on exports from a Libyan terminal and an expected supply increase from OPEC+ added to pressure.

Libya’s National Oil Corporation (NOC) said it had lifted a force majeure on Hariga port after settling a dispute over its budget with the new government. Libyan oil production fell last week from 1.3 million bpd to about 1 million bpd after the NOC declared the force majeure.

Weekly Outlook

In my opinion, both WTI and Brent crude oil futures are trading above their “sweet spots” so I don’t think OPEC+ will deviate from its decision in April to curb production by 350,000 bpd in May, 350,000 bpd in June and 400,000 bpd in July.

If WTI oil were to suddenly drop below $55.00 per barrel, and Brent below $60.00 per barrel then I think OPEC and its allies would have no choice but to trim its proposed production hikes for May, June and July.

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