WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled higher Tuesday afternoon, although moved off intra-session highs after India declared a nationwide lockdown of some 1.3 billion people amid signs of a spreading coronavirus pandemic. This further weighed on the outlook for global oil demand already slowed by widespread shut-ins in western Europe and the United States.
India on Tuesday began the world's largest lockdown for the duration of 21 days after the country's health officials reported a sudden spike in new coronavirus cases. India's Prime Minister Narendra Modi said during a televised address to the nation that if India doesn't "handle these 21 days well, then our country will go backwards by 21 years."
India remains one of the fastest growing markets for oil consumption and refining. According to the International Energy Agency, India's oil demand growth is set to overtake China's by the mid-2020s. However, with the severe disruptions to transportation and crude refining in both countries due to developing pandemic, it is unclear how this trajectory will play out in the near future.
After months of a nationwide lockdown in January and February, China's National Health Commission once again reported Tuesday a surge in new coronavirus cases across the country that Beijing said are believed to be imported from abroad.
Meanwhile, coronavirus-led slowdowns began showing up in economic data out of the United States and European Union this week, detailing some of the most dismal readings on services and industrial output since at least the financial crisis of 2008.
A private survey showed Tuesday U.S. purchasing manufacturing index plunged 9.1 points in March to a 40.5 reading, with declines largely attributed to asymmetrical slowdown across services as restaurants and bars began shutting their doors this month. That follows a slew of bearish data out of the Eurozone, detailing a steep contraction in Germany and France's service sector that usually outperform manufacturing. That relationship flipped in March.
Markets, however, seemed to have priced in the expected drop in global economic activity and to have turned focus to the government's efforts to counter the economic impact of the coronavirus. On Monday (3/23), the Federal Reserve moved to unlimited bond purchases and credit expansion to small and medium-sized businesses among other measures to support the world's largest economy.
On Capitol Hill, lawmakers are also said to be close to reaching a $2 trillion coronavirus relief package that will provide direct financial support to a majority of American households and businesses as restrictions and closures keep millions working from home.
Separately, oil traders will keep an eye out for weekly changes in U.S. crude and product inventories for the week ended March 20, with consensus calling for an increase in crude and gasoline stocks, while distillate fuel supply is expected to show a decline on the week.
At settlement, NYMEX May West Texas Intermediate futures clawed back $0.65 to $24.01 barrel (bbl) and ICE May Brent gained $0.12 to $27.15 bbl. NYMEX April ULSD futures advanced 6.42 cents at $1.0803 gallon and front-month NYMEX RBOB contract gained 3.19 cents to close at $0.4437 gallon, reversing off Monday's $0.3760 21-year low on the spot continuous chart.
The U.S. dollar weakened 1% Tuesday to 102.247 after reversing off a 103.96 17-1/2 year high following the Federal Reserve's third emergency action in March on Monday, lending support for WTI futures.
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