The Coronavirus outbreaks continue to rise, with some countries reporting a record daily increase in outbreaks and extending quarantine measures that could limit demand for oil. China, the world’s largest importer of oil, has seen an increase in the incidence of Covid-19, with severe flooding and hurricanes in the central and eastern parts of the country.
Brent crude rose 42%, or 31 cents, to settle at $74.99 a barrel in the latest trading session. Also, the price of the OPEC oil basket in the last transactions increased by 13% and increased by 10 cents to 74 dollars and 19 cents. Meanwhile, the price of Iranian heavy oil fell by 1.7% and fell by one dollar and 20 cents to 69 dollars and 42 cents.
Oil prices fell on Monday due to concerns about fuel demand due to the outbreak of the Delta variant of COVID and floods in China.
Although China’s oil refining rate is expected to hit record highs in the second half of this year, China’s crackdown on abuse of import quotas and the impact of high oil prices could lead to a sharp drop in oil imports to a two-year low. The last decade will be in 2021.
Avatar Sando, chief commodity manager at Philip Futures Singapore, said the Delta variant was still in full swing and China had begun to crack down on private refineries so their import growth would not be high. Investors are also eyeing the results of the U.S. Federal Reserve’s monetary policy meeting and the weekly statistics of the country’s oil reserves and oil products to evaluate prices.
Strong U.S. demand for oil and expectations of supply shortages relative to prices supported prices and helped both indexes recover from last Monday’s 7% drop and achieve weekly growth.
“When Brent crude fell below $70, demand for cheap goods was high and economic factors for energy seemed strong,” said Howie Lee, an economist at OCBC Bank Singapore. Demand is strong, especially in the United States and has eased concerns about the impact of the Delta variant on demand.
Despite the recent agreement between OPEC and its allies to increase oil production by the end of this year, global markets are expected to continue to have supply shortages. The prospect of a quick return of Iranian oil to the market has weakened with the postponement of negotiations to August.
According to Reuters, the number of drilling rigs in the United States grew slightly last week, with financial discipline maintained by manufacturers. The Baker Hughes Energy Services report shows that the number of oil drilling rigs increased by seven rings last week to 387, the highest level since April 2020.