Oil prices dropped early on Monday, as renewed concerns about oil demand had the market rethink whether last week’s OPEC+ decision to ease the production cuts by more than 1 million bpd over the next three months was a wise move amid still fragile demand recovery.

As of 9:19 a.m. EDT on Monday, WTI Crude prices had dipped below $60 a barrel and traded at $59.86, down 2.42 percent. Brent Crude was down 2.41 percent at $63.20.  

“Markets got off to a slow start after a long weekend, digesting last Thursday’s decision by OPEC+ and Saudi Arabia to gradually raise supply over May-July, against a festering Covid situation in Europe and some other hotspots across the world,” Vanda Insights said on Monday.

After another surprise decision from OPEC+ last Thursday, oil prices jumped by more than 3 percent before the long weekend, as the market interpreted the easing of the cuts plus Saudi Arabia reversing its extra cut of 1 million over the summer as a sign from the alliance that demand is expected to be strong over the rest of the spring and the summer.

But on Monday, news out of India, the world’s third-largest oil importer, showed that demand recovery continues to be a rocky path. India reported its highest number of new daily coronavirus cases since the pandemic began and reinstated lockdowns in some areas, including in its biggest city, Mumbai. Related: This Tiny Country Could Become Europe’s Newest Oil Producer

India’s lockdown and continued lockdowns in major European economies, including Germany and France, are once again rattling the oil market amid fears that expectations of strong demand from now on may not materialize.

The potential of Iranian oil barrels legitimately returning to the market is also upsetting forecasts of demand and supply for the rest of the year, although Iran’s oil is not expected to return very soon.

The United States will take part in indirect talks about the Iran nuclear deal with diplomats from Europe, Russia, and China in Vienna this week. Although the start of talks doesn’t mean a swift return to the so-called Iran nuclear deal, the odds of the U.S. lifting of the sanctions on Iranian oil exports may have risen compared to a few months ago.

By Tsvetana Paraskova for Oilprice.com

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