Oil Bullish on Investors Confidence Amid Surging COVID Cases
By Adedapo Adesanya
Oil prices opened the week stronger as investors continued to bet on tight supply and rising vaccination rates and overlooking surging COVID-19 cases worldwide.
Brent crude gained 39 cents or 0.52 per cent on Monday to settle at $74.89, while the West Texas Intermediate (WTI) crude moved up by 28 cents or 0.39 per cent to $72.19 per barrel.
Investors continue to show support for the black gold as strong US demand and expectations of tight supplies prevail despite the surrounding factors.
These factors helped both contracts to recover from a 7 per cent slump last week to mark their first gains in almost three weeks last week.
Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to raise their production through the rest of the year by a total of 2.1 million barrels.
Market analysts noted that pandemic-fuelled demand fears have not completely lost their grip on market sentiment.
Over the weekend, coronavirus cases continued to rise with some countries reporting record daily increases and extending lockdown measures that could slow oil demand.
In addition, China, the world’s largest crude importer, has also seen a rise in COVID-19 cases. The Asian giant has been the global oil demand driver for the last decade, accounting for more than 40 per cent of worldwide growth in oil imports for the past six years.
The US issued travel warnings to Spain and Portugal due to rising COVID-19 cases and said that wider travel curbs will not be lifted due to the highly infectious delta variant and rising domestic infections.
Yet, demand can count on increasing vaccinations rate to guard against strict new lockdowns.
There is also a new threat to growth as China has begun to crack down on the misuse of import quotas. This, in addition to higher prices, could send Chinese oil imports to their lowest in two decades this year.
Investors are awaiting inventory data from the American Petroleum Institute industry (API) group on Tuesday and the US Energy Information Administration (EIA) on Wednesday for further evidence that demand is holding up.