On Monday, July 26, oil prices fell amid investors’ concerns over the surging COVID-19 infections. This weighed on the market sentiment surrounding the outlook for fuel demand.
The Brent oil futures decreased 1.16% to $72.59 following driving to the October 21, 2021 contract yesterday. Also, the West Texas Intermediate oil futures subsided 1.25% to $71.17.
Meanwhile, the US Gasoline futures RBOB futures climbed 0.10% at $2.2640 per gallon.
For the last few weeks, a new coronavirus outbreak has happened in Asia and the cases are still rising.
However, the oil market sentiment is beginning to decline as COVID-19 infections are also rising in the west, where heavy-energy consuming nations are located.
Earlier in the day, a White House official stated that the United States will not lift its existing travel bans amid the delta variant.
In Europe, German Chancellor Angela Merkel’s office is concerned that COVID-19 cases may surge to 100,000 per day for the next few months.
While the French government approved the bill which requires the public to get a health pass through vaccination.
This caused Goldman Sachs to slash its US economic growth projection for the rest of 2021.
It estimated for the final two quarters of the year dropped 1% to 8.50% and 5.0%, respectively.
Over the last reporting week, analysts also reduced their net long oil positions in both ICE BRENT and NYMEX WTI contracts.
For the former, 50,786 lots were reduced leaving 261,841 net long oil lots, which is the lowest position since late May 2021.
For the latter, the move was even bigger as it was slashed 64,702 lots. Therefore, 316,789 net long oil lots were left.
COVID-19 Surge Coincided OPEC+ Oil Supply Boost
Moreover, the surge in coronavirus infections coincided with an anticipated boost of supply from the OPEC+ next month.
An analyst stated that this would mean a rough time for oil as well as a tightening market.
However, there are discussions regarding the revival of a 2015 nuclear treaty. This could put Iranian supplies back on the market.
Also, the United States considers cracking down on Iranian oil sales to China to prepare if the talks will not take place. Or, if Iran will hold a hard posture if it takes place.
Additionally, China is also cracking down on the abuse of import quotas that joined higher oil prices.