Oil prices drop sharply as rising coronavirus cases prompt questions about demand recovery

• Brent and US oil futures slide with investors concerned about rising COVID-19 cases around the world.
• Brent, oil's international benchmark, fell below $62 a barrel as infections increased in Brazil and India and investors watch for European developments.
• Vaccinations in the US are increasing but that may not be enough to quell demand worries.

Oil prices were knocked down Monday as rising COVID-19 infections in Europe and other parts of the world stoked questions about demand recovery after OPEC and its allies decided to increase the output of the commodity.

Brent oil futures, the international benchmark, dropped below $62 a barrel and US oil prices fell below $60 a barrel and gave up the gains they made after OPEC late last week said that from May to July it will add about 2 million barrels of oil each day to the market.

The world's leading oil ministers "recognized the improvements in the market supported by global vaccination programmes and stimulus packages in key economies," but noted that the volatility observed in recent weeks warranted "vigilant" monitoring in developments.

"It is hard to gauge the demand outlook since you have Europe still struggling with their vaccine distribution, while India and Brazil still have COVID cases trending higher," said Edward Moya, senior market analyst at Oanda, in a Monday note.

Brent oil fell by 4.3% but lost as much as 5.3% when prices fell to Monday's low of $61.25. West Texas Intermediate crude futures lost as much as 6.2% by hitting an intraday low of $57.63, with the loss later pared to 4.7%. The S&P 500 energy sector fell by nearly 3% during Monday's trade, the worst-performing on the benchmark even as the stock index traded at record highs above 4,000.

Prices slumped as several countries struggle with higher COVID case counts. Germany backed off plans to impose a lockdown during the Easter weekend. Brazil's health care system is reportedly on the brink of collapse and has become the latest epicenter of the outbreak. India reportedly posted more than 100,000 new COVID-19 cases on Sunday and France recently entered its third national lockdown.

In the US, meanwhile, coronavirus vaccinations have surpassed more than 3 million a day on a weekly average, according to the Centers for Disease Control and Prevention.

"The US looks like it's ready to party like it's 2019, but that won't be enough to send oil prices much higher from current levels. The rest of the world seems to still be putting restrictions on people moving and until that changes, crude prices will struggle," said Moya.

Among exchange-traded funds, the United States Oil Fund fell 4% and the United States Brent Oil Fund lost 3.8% during Monday's trade.