Crude oil futures started the London session bearish today as concerns over slowing global growth outweighed the prospect of tightening supply after talks among key producers to raise output in coming months stalled.
Brent crude oil is down 1.61%, currently trading at $74.34 a barrel while U.S. oil, West Texas Intermediate crude is down 1.68%, currently trading at $73.34, as of the time of writing this report. Both benchmarks fell around 1% last week but still hover near highs last reached in October 2018.
A major reason for the decline of oil is the spread of the COVID-19 Delta variant and unequal access to vaccines. Finance chiefs of the G20 stated on Saturday that the virus threatens global economic recovery. A Reuters report on new COVID-19 infections shows them rising in 69 countries, with the daily rate pointing upwards since late June and now hitting 478,000.
Oil prices have also dipped because the Organization of the Petroleum Exporting Countries and their allies (OPEC+) have failed to reach an agreement to increase output from August. The impasse brought about by two oil giants, Saudi Arabia and the United Arab Emirate (UAE) has left investors worried about their bull position because of the possibility of OPEC+ members pumping at maximum capacity which does not augur well for the price. The impasse was a result of the UAE rejecting a proposed eight-month extension to OPEC+ output curbs.
Stephen Brennock of oil broker PVM stated, “The market has been a bit negative as of late amid the growing sense that the latest OPEC+ impasse could be a precursor to a pump-and-grab scenario, meaning a lot more oil potentially gets put on the market.”
Amidst the OPEC+ rollercoaster, WTI crude futures posted their sixth weekly gain last week after a bullish report from the U.S. Energy Information Administration showed U.S. crude and gasoline stocks fell while gasoline demand reached its highest since 2019, increasing investors confidence. Even with this, oil prices may end their winning streak at the close of the week as rising concerns of the virus spreading coupled with the inability of the OPEC+ to find common ground, weigh in on the market.