Oil drops as coronavirus cases surge in Asia

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HUNTINGTON BEACH, CA - APRIL 20: A man walks on a path in front of an oil derrick near the Huntington Beach Oil Fields on April 20, 2020 in Huntington Beach, California. Oil prices traded in negative territory for the first time as the spread of coronavirus (COVID-19) impacts oil demand. Michael Heiman/Getty Images/AFP

Oil fell by $1 on Tuesday, pulling back from one-month highs, on fears that India, the world’s third-biggest oil importer, may impose restrictions as coronavirus infections and deaths soar in that country.

Oil prices have risen steadily this year on expectations of a recovery in demand but while the United States and China are rebounding, numerous other countries are not.

“Given India’s position as a major crude oil importer in the world, new restrictions would be very bad for the energy complex,” said Bob Yawger, director of energy futures at Mizuho.

India’s Prime Minister Narendra Modi on Tuesday said citizens should take precautions to halt the spread of COVID-19, but stopped short of imposing lockdowns.

Brent crude fell $1.26, or 1.9%, to $65.79 a barrel after earlier reaching its highest since March 18 at $68.08. U.S. West Texas Intermediate (WTI) crude fell $61.77, or 2.5%, to $1.61.

Elsewhere in Asia, the Philippines is experiencing a second wave of infections. Hong Kong will suspend flights from India, Pakistan and the Philippines from April 20 for two weeks.

Crude prices rallied earlier in the session after Libya declared force majeure on exports from the port of Hariga and said it could extend the measure to other facilities, citing a budget dispute.

Hariga is scheduled to load about 180,000 barrels per day (bpd) in April. Libya’s production was hit last year after eastern-based forces in that country’s civil war blockaded oil terminals.

Overall, oil prices have recovered from historic lows last year, helped by some demand recovery and huge output cuts by OPEC and allies, together known as OPEC+. A year ago today, WTI sank to minus $40.32 due to a massive glut.

The American Petroleum Institute’s report on U.S. supplies will be released at 2030 GMT, with an expectation that U.S. crude stockpiles are expected to drop by 2.9 million barrels.