By Adedapo Adesanya
The price of the Brent crude further fell on Friday, August 20 as it sold below $65 per barrel after losing $1.27 or 1.91 per cent to $64.87 per barrel.
The global crude benchmark was not the only decliner yesterday as the United States’ crude benchmark, the West Texas Intermediate (WTI) crude oil futures, went down by $1.52 or 2.39 per cent to $62.25 per barrel.
Business Post reports that the fall reported during the session was compounded by the selling of the oil futures by investors in anticipation of weakened fuel demand worldwide due to a surge in COVID-19 cases.
On a weekly basis, the Brent crude went to its lowest since April, falling about 8 per cent while WTI lost more than 9 per cent in the week.
The crude market has now posted seven consecutive days of losses as nations worldwide are responding to the rising infection rate due to the coronavirus Delta variant by adding travel restrictions to cut off the spread.
Analysts noted that the oil market has quickly noticed that the Delta variant was a growing problem and a potential hurdle to a mobility/fuel demand recovery as the world’s largest producer, China, has imposed stricter disinfection methods at ports, causing congestion.
Although most of the demand disruption seen in road fuels since the outbreak of the pandemic has now been reversed, jet fuel has thus become by far the top laggard that is keeping total oil demand from recovering to pre-COVID-19 levels.
This has further been compounded by nations including the US and Australia adding travel restrictions.
The market was impacted by the US Dollar hitting a nine-month high on signs the US Federal Reserve is considering reducing stimulus this year.
Oil prices move inversely to the American currency, making oil more expensive for foreign purchasers when the dollar rallies.
As demand tanks, supply seems to be increasing as US production rose to 11.4 million barrels per day in the most recent week, and drilling firms added rigs for the third week in a row.
This is happening as the Organisation of the Petroleum Exporting Countries and allies (OPEC+) are slowly boosting supply that had been shut early in the pandemic.
The 23-member alliance has been unwinding record output cuts agreed in April 2020, as demand and the economy recovers with 5 million remaining now.
The agreement allows for a 360,000 barrels per day increase in OPEC output in July versus June, while Saudi Arabia had pledged to add 400,000 barrels per day as the final step in a plan to unwind one million barrels per day voluntary cut it made in February, March and April.
