Brent Gives up 2% Amid COVID-19 Surge in Asia

By Adedapo Adesanya

Brent crude oil price opened the week in the negative territory as a spike in COVID-19 cases in Asia halted the recent rally by 2 per cent before this week’s meeting by the Organisation of the Petroleum Exporting Countries and its allies (OPEC +).

On Monday, the price of the Brent futures fell by $1.52 or 2 per cent to settle at $74.66 per barrel while the West Texas Intermediate (WTI) crude futures rose by $1.21 or 1.63 per cent to close at $74.05.

Concerns about a spike in coronavirus infections in Asia impacted that market with Australia’s most populous city of Sydney plunging into a lockdown after a cluster of cases involving the highly contagious Delta strain ballooned.

Indonesia is battling record high cases while a lockdown in Malaysia is set to be extended. Thailand too announced new restrictions in Bangkok and other provinces.

This is coming as OPEC+ is expected to increase output at their meeting on Thursday.

OPEC+ has increased supply by 2.1 million barrels per day of oil from May to July after cutting supplies during the pandemic and could decide to add more barrels in August after crude prices last week rose for a fifth week in a row.

Market analysts expect OPEC+ to increase output by about 500,000 barrels per day in August, which is likely to support higher prices.

With fuel demand rebounding on strong economic growth and increased travel during summer, the market is expecting an increased supply.

Iran and the United States, meanwhile, were expected to resume indirect talks on reviving a 2015 pact over the Middle East country’s nuclear work.

An agreement could lead to a lifting of US sanctions and more Iranian crude, up to one million barrels per day, on the market.

However, tensions rose after US airstrikes on Sunday against Iran-backed militias in Iraq and Syria. Both Iraq and Syria condemned the unilateral US strikes as violations of their sovereignty

Iran said on Monday it has yet to decide whether to extend a monitoring deal with the United Nations nuclear watchdog which lapsed last week.

Later in the week, a closely-watched US jobs report will be released for June which could point to strong labour demand. In addition, monetary and fiscal stimulus around the world in response to the COVID-19 pandemic is boosting interest in assets, despite an uneven pace of recovery between regions.