Crude Slides as COVID-19 Resurgence Threatens Demand

By Adedapo Adesanya

Oil dipped on Monday as the market grappled with COVID-19 resurgence in several regions amid slowing economic growth in China.

This moderated the Brent crude by 17 cents or 0.23 per cent to $75.34 per barrel and slowed the West Texas Intermediate (WTI) crude by 20 cents or 0.27 per cent to $74.30 per barrel.

Cases in parts of Japan, South Korea and Vietnam of the Delta variant have led to new restrictions and will likely affect demand for the commodity.

Also, in the United States, which is the largest producer of oil, cases soared by 47 per cent in the week ending Sunday, the largest weekly rise since April 2020.

In Europe, officials in the United Kingdom and France are issuing warnings about new cases and reopenings.

The World Health Organization (WHO) has warned that the fourth variant of the virus was becoming dominant and many countries had yet to receive enough doses of vaccine to secure their health workers.

Also affecting prices yesterday was the fact that the Organisation of the Petroleum Exporting Countries and allies (OPEC+) was yet to decide on the next step following last week’s row between Saudi Arabia and the United Arab Emirates (UAE).

The alliance abandoned meetings last week after the dispute over production cuts, and one week later, no deal is in sight.

Expectations also show that the economic rebound in the world’s largest importer of oil, China, is slowing. Data expected on Thursday may show that growth eased in the second quarter to 8 per cent from the record gain of 18.3 per cent in the first quarter, according to a Bloomberg poll of economists.

A stronger US Dollar also weighed on prices of oil at the market yesterday, making commodities priced in the currency less attractive.

Rebounding fuel consumption in economies such as the US and China has boosted oil prices this year amid tight global supplies.

However, that seems to be under threat as the Delta variant of COVID-19 is threatening the demand recovery while OPEC+ remains in a stalemate over near-term production.

The market will be hoping for some headway as the International Energy Agency (IEA) will provide investors with a forecast of the market on Tuesday with the release of its monthly report, while OPEC will release its own monthly report on Thursday.