Oil prices fell nearly 1% on Friday, posting their hardest weekly losses in months, amid concerns that travel restrictions to curb the spread of the Delta variant of COVID-19 will derail the global recovery in energy demand.
This was the biggest weekly drop in 4 months for Brent and 9 months for WTI.
Dollar rises to biggest weekly gain since June. Crude oil futures also came under pressure as the dollar strengthened after monthly US job growth came in higher than expected. That’s because a stronger dollar makes dollar-denominated oil more expensive for buyers in other currencies.
Brent crude futures fell 59 cents, or 0.8%, to $70.70, while West Texas Intermediate (WTI) crude futures fell 81%, or 1.2%, to $68.28 a barrel.
During the week, the global benchmark Brent fell more than 6% in its biggest week of losses in four months, and WTI fell nearly 7% in its biggest weekly drop in nine months.
The price action we see is a function of the macro picture. The Delta variant is now taking the effect and risk aversion has begun in many markets, not just oil.
COVID-19 cases in the United States have climbed to a six-month high, Japan is poised to extend its emergency restrictions to more parts of the country, China, the world’s second-largest oil consumer, has imposed restrictions in some cities and limited flights.
The rising travel restrictions in China, which are under the watchful eye of traders, could become a major determinant in the price of oil as this month progresses.
Energy services firm Baker Hughes Co said US oil rigs rose two to 387 this week. Drill rig growth has slowed as drillers continue to focus on capital discipline.