By Adedapo Adesanya
Crude oil prices fell for a second day on Friday as surging COVID-19 cases worldwide forced governments to revive movement restrictions, dampening oil demand.
At the market yesterday, the price of the Brent declined by $1.17 or 1.64 per cent to $70.14 per barrel, while the West Texas Intermediate (WTI) slumped by $1.16 or 1.68 per cent to $67.93 per barrel.
The International Energy Agency (IEA) has warned that demand growth for crude and its products had slowed sharply as cases continue to rise across the globe.
It said its forecasts for oil consumption in the second half of the year had been appreciably downgraded and would fall below its early projections by more than 500,000 barrels a day.
“Growth for the second half of 2021 has been downgraded more sharply, as new Covid-19 restrictions imposed in several major oil-consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the IEA said in its influential monthly oil report.
This further hit the market as the rapid spread of the Delta variant undermined deliveries in China, Indonesia and other countries especially in East and South-East Asia, although the numbers are still much lower than in many European countries such as France and the UK, where new daily cases are around 30 000.
Japan has also reported a surge in infections, with hospitals in Tokyo said to be under fresh pressure. The government will decide next week whether spectators will be allowed at the Paralympic Games, due to open on August 24.
The rising infection rate has led analysts to shift their stance on previous bullish expectations.
Goldman cut its estimate for the global oil deficit to one million barrels per day from 2.3 million barrels per day in the short term, citing an expected decline in demand in August and September.
However, Goldman expects the demand recovery to continue alongside rising vaccination rates.
JP Morgan, meanwhile, said it now sees the global demand recovery stalling this month with demand remaining roughly in line with the 98 million barrels per day average for global consumption in July.
The Organisation of the Petroleum Exporting Countries (OPEC) however sees a different play as it raised its expectations for supplies next year from other producers, including US shale drillers, which could potentially snarl efforts by the group and allies, known as OPEC+, to achieve a balance in the market.
