Global oil prices trade under pressure of Delta variant
Market volatile as investors digest OPEC+ deal
Crude oil futures plunged last Monday, with WTI dropping more than 7% to below $70/bbl. The sharp decline was partly attributed to the OPEC+ deal to boost oil output and partly to worries about the spread of the Delta variant would slow oil demand.
Following an impasse that lasted from early July until just ahead of an Islamic holiday, OPEC and its allies finally struck a deal that allowed monthly supply hikes of 400,000 barrels a day. The United Arab Emirates and Saudi Arabia were unable to come to an agreement to increase oil supply in earlier meetings.
Oil traders were uncertain whether the agreement signalled bullish expectations regarding demand or bearish; as some forecast that demand might struggle to keep up with additional supply with the recent surge in cases. On the other hand, some traders said their oversupply concerns were eased following OPEC+’s modest increase.
Rising cases weighed against bullish outlook
Although strong demand from the US and expectations that demand could actually outpace supply helped both Brent and WTI contracts recover from a 7% plunge last Monday, the Delta variant continues to cast shadow on near-term predictions. China’s crackdown on the misuse of crude import quota is also among factors weighing on demand forecasts.
According to most investors, it remains to be seen whether the bullish supply and demand outlook will outweigh crude oil’s recent spell of price volatility.
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