Oil prices dip amidst COVID-19 resurgence

Oil edged lower as the coronavirus resurgence raised concerns about demand ahead of an OPEC+ meeting this week that could see the alliance boost some halted output.

Futures in New York slipped 0.2% after falling back below $73 a barrel on Monday. The more infectious delta variant of the virus has resulted in a spike in U.K. cases and led to renewed restrictions and lockdowns in other regions.
While the crude market has tightened, the latest flare-up may feature in talks when OPEC+ gathers Thursday to decide on adding more supply in August.

Oil slips back below $73 as investors weigh demand concerns

Oil is still up around 10% this month as a rebound from the Covid-19 pandemic accelerated in key regions including the U.S. and China, underpinning a surge in fuel consumption and helping to drain bloated stockpiles. Futures and swaps in leading pricing locations are in a bullish backwardation structure, although the spread is narrowing in what could be early signs of some weakness.

“Oil prices are trimming back because of rising concerns about the spread of the Covid-19 Delta variant,” said Victor Shum, vice president of energy consulting at IHS Markit. However, demand is spiking, driven by countries including the U.S., China and the Middle East, he added.

West Texas Intermediate for August fell 0.2% to $72.75 a barrel on the New York Mercantile Exchange at 7:36 a.m. in London.
Brent for August settlement slid 0.3% to $74.48 on the ICE Futures Europe exchange after falling 2% on Monday.
The prompt timespread for Brent was 52 cents in backwardation, compared with 73 cents a week earlier.

The U.K. on Monday reported the most new Covid-19 cases since January, and Hong Kong, Spain and Portugal all imposed new restrictions to visitors from the nation. Authorities are also racing to contain outbreaks in Australia. The virus flare-up may lead to export-focused refiners in Asia trimming processing rates.

Meanwhile, OPEC+ expects that the market will remain in deficit this year if it keeps production steady, according to data that technical experts will review on Tuesday ahead of the coalition’s main meeting. The group may boost daily output by 500,000-to-1 million barrels, RBC Capital Markets said in a note.

Indian pump prices are in unchartered territory as ever-increasing government levies coincide with crude’s recovery from the depths of the Covid-19 pandemic.

The physical oil market, in which millions of barrels of crude are bought and sold each day, is screaming for more supply in the run-up to a pivotal meeting of OPEC+ producers this week.

Saudi Aramco is expected to increase its official selling price of Arab Light crude by 65 cents month-on-month for August sales to Asian customers, according to a survey.