Oil prices bounced back early on Tuesday from drops in the previous session, but gains were seen likely capped by growing concern about fuel demand in India, the world’s third-biggest crude importer now slammed by spiralling new coronavirus cases.

Brent crude was up 26 cents, or 0.4 per cent, at $65.91 a barrel by 0141 GMT, after dropping 0.7 per cent on Monday. US oil gained 23 cents, or 0.4 per cent, to $62.14, having declined by the same amount the previous session.

“There are clearly some concerns around the demand outlook, particularly over how the Covid-19 situation is developing in India,” ING Economics analysts said in a note.

Domestic oil, gas output remained below pre-Covid levels in February

The Indian government ordered the country’s military to help respond to the surging coronavirus infections, with countries including Britain, Germany and the US promising aid as the emergency overwhelms hospitals.

No change seen

India’s woes come as the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, are set to discuss policy on production at a meeting this week.

Challenges ahead for oil and gas sector

The OPEC+ joint technical committee has maintained a forecast for growth in oil demand this year, but has concerns about the surging Covid-19 cases in India and elsewhere, three sources from the producer group told Reuters.

“The big question is whether OPEC+ feels that the situation is bad enough to alter its planned production easing from May 1,” said ING. “We still expect that the group will announce no changes to its plan when they meet tomorrow.”

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