Oil Tumbles 7%, Sending US Crude Below $60, on Europe Worries By Investing.com

By Barani Krishnan 

Investing.com – Oil prices fell more than 7% on Thursday, tumbling their most in a day since June and sending U.S, crude futures beneath $60 per barrel, amid a surge in new COVID-19 cases in Europe and the bloc’s continued challenge with vaccinations for the virus.

New York-traded , the benchmark for U.S. crude, was down $4.76, or 7.4%, at $59.84 per barrel by 2:16 PM ET (18:16 GMT), after an intraday low at $59.65. It was WTI’s sharpest one-day drop since June 11, when it lost 8.2%. It was also the fifth straight day in the red for the U.S. crude benchmark, which has lost more than 9% since its last positive close on March 11.

London-traded , the global benchmark for crude, was down $4.84, or 7.1%, at $63.16, after a session low at $63.07.

Crude prices tumbled as the number of confirmed coronavirus cases in Germany, the European Union’s largest country by population, jumped by over 17,000, the biggest daily rise since Jan. 22, data from the Robert Koch Institute for infectious diseases showed.

Large parts of Italy, meanwhile, were back in lockdown. 

The surge in European cases and more pandemic-related restrictions suggested that a third wave of the COVID-19 was building on the bloc, on the back of a sluggish immunization program.

Also weighing on oil was the International Energy Agency’s prediction that it will take another two years for global oil demand to reach pre-pandemic levels. U.S. government data showing a fourth straight weekly build in domestic added to market jitters.

Sentiment was also hurt after a decision by India, the third biggest oil importer after China and the United States, to cut its purchases from Saudi Arabia by about a quarter from May after Riyadh refused to let the OPEC+ alliance of oil producers that it controls to raise output. 

New Delhi needs more oil supply, and at lower prices too, to bring down Indian pump prices for fuel that have soared from nearly a year-long of OPEC+ cuts. Iran is already defying U.S. sanctions on its oil to export crude to China at deeply-discounted prices, undermining OPEC+ cuts and the Islamic Republic could strike a deal with India as well. 

Until Thursday’s sell-off, crude had staged a rally with few interruptions over the past four months, adding about 80% to prices. Aside from optimism over COVID-19 vaccines and the reopening of the global economy from lockdown, the rally was driven by one thing: production cuts by OPEC+.

Since April, the 23-nation OPEC+ — made up of the 13-member Saudi-led Organization of the Petroleum Exporting Countries and 10 non-OPEC nations steered by Russia — have withheld between nine and seven million barrels per day of regular supply from the market.

That has boosted WTI from a historic negative pricing of minus $40 per barrel in April to highs of nearly $68 last week.

Technical charts on Thursday indicated that the U.S. benchmark may fall further, if the downside pressure isn’t alleviated soon.

“Further weakness can push it down to $59.75 which is the 50 Day EMA (Exponential Moving Average) and $59.35 which marks the 10-week EMA,” said Sunil Kumar Dixit of S.K. Dixit Charting.