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Oil Falls As COVID-19 Surge Threatens Fuel Demand Prospects

29 June 2021

Oil Falls As COVID-19 Surge Threatens Fuel Demand Prospects

Oil prices fell on Tuesday amid fears of slowing fuel demand growth as outbreaks of the highly contagious COVID-19 Delta virus have triggered new travel restrictions around the world.

 

Brent crude futures fell 35 cents, or 0.5%, to $ 74.33 a barrel, after falling 2% on Monday.

 

West Texas Intermediate Oil (WTI) futures fell 34 cents, or 0.5%, to $ 72.57 a barrel, up 1.5% from Monday.

 

Delta variant outbreak comes as the Organization of the Petroleum Exporting Countries (OPEC), Russia and its allies known as OPEC + are to meet on July 1 to discuss easing supply restrictions.

 

OPEC demand forecasts show that in the fourth quarter, global oil supply will lag behind demand by 2.2 million barrels per day, which gives producers the opportunity to agree to increase production.

 

"We expect the cartel to cut supplies by 250,000 barrels a day starting in August. If the taps are not turned on further, the price of Brent crude could reach $ 80 a barrel by next month," Howie Lee said. , Economist at OCBC Treasury Research in Singapore.

 

Spain and Portugal, popular summer destinations for Europeans, introduced new restrictions on unvaccinated Britons on Monday, while 80% of Australians faced tightening restrictions due to outbreaks of the virus across the country.

 

Talks to establish a travel corridor between the US and the UK have also slowed, due in part to fears of rising cases of the UK delta virus, the Financial Times reported, citing officials.

 

Analysts expect OPEC + to increase supplies by about 500,000 bpd in August as the market tightened due to strong fuel demand growth in the US and China, the world's two largest oil consumers.

 

Investors will look to the latest US inventories to bolster that sentiment as analysts expect crude oil inventories to continue falling for the sixth straight week, while gasoline inventories have also declined, a preliminary Reuters poll showed.

 

Seven analysts on average estimated a 4.5 million barrels drop in U.S. crude oil inventories in the week to June 25 in a poll conducted ahead of reports from the American Petroleum Institute, an industry group, on Tuesday and the Energy Information Administration (EIA) in Wednesday

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