Brent Price Inches Higher 5% as Oil Market Recovers

After dropping by about 10% last week, Brent crude price moves near $70 a barrel, climbed 5% to $68.82 after touching its lowest Covid-19 amidst delta variant worries. Also, the U.S. West Texas Intermediate (WTI) crude for October delivery jumped from $3.61 to $65.75.

Both benchmarks marked their biggest week of losses in more than nine months last week, with Brent sliding about 8% and WTI about 9%. Prices were affected by negative market perception last week as rate covid-19infection increased, necessitating fresh lockdowns in some countries including Japan, China and others.

However, oil prices started the week with an uptick, boosted by a mild bullish sentiment of investors, who quickly cashed in on low prices when last week both benchmarks dropped 9% over virus-induced demand worries coupled with weaker-than-expected industrial data from China and the US.

Some countries in Asia, Europe including America are responding to the rising coronavirus infection rate by introducing new travel restrictions.

China, the world’s largest oil importer, has imposed new restrictions, which is affecting shipping and global supply chains. The United States and China have also imposed restrictions on flight capacity.

Cheap dollar encourages investors

The US dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, fell 0.15% to 93.35 earlier Monday.

The decline in the value of the greenback is encouraging oil-importing countries to purchase more crude oil at cheaper dollar prices, which in turn is supporting higher crude prices. Nonetheless, the COVID-19 pandemic continues to drag oil prices down.

In Vietnam, plans are afoot to impose fresh lockdowns in Ho Chi Minh City, as cases in the Southeast Asian country’s most populous city surge,

To allay virus-induced demand fears, investors were relieved when OPEC producers and allies (OPEC+) announced their decision to stick to the previous output schedule despite calls from the US administration to increase oil production to combat rising domestic gasoline costs.

Earlier in August, the group had agreed to raise output by 400,000 barrels per day from August to December and extend its production cut agreement from April 2022 to December 2022.

Another negative impact on oil prices was the rise in US fuel stockpiles last week.

The US Energy Information Administration (EIA) announced Wednesday that the country’s gasoline inventories rose by 700,000 barrels to 228.2 million barrels during the week ending August 13. The hefty build was mainly caused by less driving activity during the country’s Memorial Day weekend last week.

Crude oil inventories, however, decreased by 3.2 million barrels, or 0.7%, during the same period.

While the approaching end of the summer driving season in the US and Europe began weighing on oil prices, the global surge of the highly contagious Delta variant was another factor exerting downward pressure on prices, fueling demand concerns.

While Japan’s emergency lockdown is extended, cases in South Korea, Malaysia, the Philippines, Vietnam, and Thailand are on the rise. South Korea reported over 2,100 new coronavirus cases on Thursday, the second-highest daily increase since the Asian country’s coronavirus outbreak last year.

Thailand also set a new daily coronavirus death record on Wednesday, with 312 individuals dying in the last 24 hours, bringing the country’s death toll to 8,285.

COVID-19 cases in Australia were at an all-time high, and New Zealand’s COVID-19 lockdown was extended for another four days after the country reported 11 new cases.

Last week, health officials in Germany reported 8,400 new cases, the second day in a row that the number of new infections topped 8,000.

Brent Price Inches Higher 5% as Oil Market Recovers