Oil prices fell by about $1 on Monday as concerns over the spread of COVID-19 strains combined with fuel demand from floods in China offset expectations that supply will be tight for the rest of the year.
Brent crude futures for September fell 95 cents, or 1.3%, to $73.15 as of 0627 GMT, while WestTexas Intermediate (WTI) crude fell 96 cents to $71.11. Earlier, both contracts dropped to just over $1.
Cases of coronavirus continued to rise over the weekend. Some countries recorded record daily cases and expanded lockdown measures that could slow oil demand. China, the world’s largest importer of crude oil, has also seen an increase in COVID-19 cases as it battles severe flooding and typhoons in the country’s central and eastern regions.
Also, Beijing’s abuse of import quotas, coupled with the impact of higher crude oil prices, is likely to drop China’s oil import growth to a two-year low in 2021 despite the expected increase in refining rates in the second half.
The Delta variant is still on the rise, and China is starting to put pressure on independent teapot refiners as import growth isn’t that high.
Investors’ eyes are on this week’s Federal Reserve meeting and US oil inventory data to determine the direction of the price.
Strong US demand and tight supply expectations support prices and the recovery of both contracts after falling 7% last Monday. The market strengthened as Brent fell below $70 and economic energy demand increased. Demand data, particularly from the US, remains strong, easing concerns.
Global oil markets are expected to contract due to rising demand, despite the Organization of the Petroleum Exporting Countries and its allies’ decision to increase production for the remainder of the year.
Iran and the US talks to revive the 2015 nuclear deal are delayed until August, while the prospects for a quick return of Iranian oil supplies dwindle. In the meantime, it is also spoken that the United States would not return to nuclear negotiations or that it is considering restricting Iran’s oil sales to China by adopting a harder line than possible.
In the United States, the recovery in oil drilling was modest as producers cut spending. U.S. oil rigs rose 7 to 387 last week, reaching their highest level since April 2020, energy services firm Baker Hughes Co said on Friday.
