Oil is rising, but the outlook is cloudy due to Corona and supply fears

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date of publication:
Jul 20 2021 8:03 GMT

Update date: July 20 2021 9:30 GMT

Oil prices stabilized today, Tuesday, after falling about seven percent in the previous session, in light of a broader decline in the market, driven by concerns about the rise in Covid-19 infections, which come at a time when producers reached a new agreement on supplies.

Brent crude gained 70 cents, or one percent, to $69.32 a barrel by 06:51 GMT. The US crude contract for August delivery, which expires later today, rose 86 cents, or 1.3 percent, to $67.28 a barrel. And US crude for September delivery rose about 1.2 percent to $67.14 a barrel.

Analysts said, “The selling that pushed prices to its lowest levels in two months, was driven by fears of the outbreak of the Delta strain of the Corona virus, while stocks fell and bonds rose.”

“Rising infections with the delta strain of coronavirus in some countries in Asia and Europe, and the possibility of travel restrictions, has somewhat clouded the demand for crude oil,” analysts at ING Economics said in a note.

“However, the physical market for crude oil has been in a tight state over recent months, while the ongoing economic recovery is likely to remain supportive of oil demand during the second half of the year.”

On Friday, US officials said that the mutated strain Delta, which is significantly more contagious than previous strains, is now dominant in the world.

The strain has been monitored in more than 100 countries around the world, and irregular vaccination campaigns in many places are undermining the fight against the virus; Which raises the possibility of imposing more general isolation measures that have damaged the demand for petroleum products.

But analysts say there are high-frequency indications that weekend restaurant reservations in the United States, the world’s largest consumer of crude, are at pre-Covid levels, while domestic flights are at their highest levels since the pandemic began.

Oil was also hit after the Organization of the Petroleum Exporting Countries (OPEC) and allies, the group known as OPEC+, reached a settlement on Sunday to raise production.

The OPEC+ agreement removes more supply constraints that have been supporting the market for a year. OPEC + keeps about 5.8 million barrels per day of crude out of the market, a number that will drop to two million barrels per day by the end of 2021.





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