Oil Prices Fall Back
Oil prices dipped on Tuesday. This reversed previous gains as optimism. Major producers will not increase supply anytime. Instead there are rising concerns about decreasing demand due to an increase in the Delta form of coronavirus infections.
Brent crude was down 51 cents, or 0.7%, at $69.00 a barrel as of 0703 GMT, after reaching a high of $69.77. WTI crude in the United States fell 52 cents, or 0.8 percent, to $66.77 a barrel after touching $67.66 earlier.
Japan was planning to extend its state of emergency in Tokyo. It will also enforce this in other areas until September 12. In fact, Japan expanded restrictions to seven more prefectures. Authorities warned on Tuesday that 19 instances had increased. Moreover, the number of cases in Sydney expects to increase significantly in the coming weeks despite a prolonged lockdown. Brent declined 1.5 percent on Monday, while WTI sank 1.7 percent.
The Market
Prices recovered from their losses in early Asian trade after four sources told Reuters that OPEC+ believes oil markets do not require any more crude than they plan to release in the coming months.
The administration of US President Joe Biden encouraged the producer group last week to increase oil output to combat rising gasoline costs, which they regard as a danger to the global economic recovery. However, the market slowed in the middle of the day due to concerns over the resurgence of the COVID-19 infection.
The high fuel demand season in the northern hemisphere summer is almost over. The expanding pandemic is delaying a recovery in global fuel consumption, Emori predicted, anticipating a continuing gloomy market tone.
Concerns about reduced demand in China, the world’s largest oil importer, intensified on Monday. This was after its daily crude processing fell to its lowest level since May 2020 in July.
China’s Factory Output
As a result of additional Covid-19 outbreaks and floods, China’s industrial output and retail sales growth slowed drastically and fell short of expectations in July.
Hedge funds sold petroleum for the sixth time in eight weeks last week. Increasing coronavirus illnesses in China, Europe, and North America hampered expectations of a quick return to long-distance aviation travel. Despite this, the market has shrugged off increased shale oil output in the United States, according to Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.
According to the Energy Information Administration’s monthly drilling productivity report released on Monday, U.S. shale oil output predicts to grow to 8.1 million barrels per day (BPD) in September, the highest level since May 2020.
