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Home Coronavirus

Oil prices fall as coronavirus, floods threaten demand By Reuters

The News London 365 by The News London 365
July 26, 2021
in Coronavirus
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Vaccinations slowing spread of COVID-19 cases in Spain

© Reuters. FILE PHOTO: Pipelines run to Enbridge Inc.’s crude oil storage tanks at their tank farm in Cushing, Oklahoma, March 24, 2016. Picture taken March 24, 2016. REUTERS/Nick Oxford/File Photo

By Florence Tan

SINGAPORE (Reuters) – Oil prices fell on Monday as concerns about fuel demand from the spread of COVID-19 variants and floods in China offset expectations of tight supplies through the rest of the year.

futures for September fell 44 cents, or 0.6%, to $73.66 a barrel by 0432 GMT while U.S. Texas Intermediate crude was at $71.62 a barrel, down 45 cents.

Coronavirus cases continued to rise over the weekend with some countries posting record daily increases and extending lockdown measures that could slow oil demand. China, the world’s largest crude importer, has also seen a rise in COVID-19 cases while the nation battled severe floods and a typhoon in central and eastern parts of the country.

Also, Beijing’s crackdown on the misuse of import quotas combined with the impact of high crude prices could see China’s growth in oil imports sink to the lowest in two decades in 2021, despite an expected rise in refining rates in the second half.

“The delta variant is still spreading and China has started to clamp down on teapots so their import growth would not be that much,” said Avtar Sandu, a senior commodities manager at Singapore’s Phillips Futures, referring to independent refiners.

He added that investors are looking ahead to the next Federal Reserve meeting and U.S. oil inventories data later this week for price direction.

However, strong U.S. demand and expectations of tight supplies are underpinning prices, enabling both contracts to recover from a 7% slump last Monday to mark their first gains in 2-3 weeks last week.

“Bargain hunters came in droves when Brent got below $70 and the economic demand for energy looks robust,” Howie Lee, an economist at Singapore’s OCBC Bank said.

“Demand data especially from the U.S. continues to be strong and has reduced those concerns.”

Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries and their allies to raise production through the rest of the year.

The prospect of a swift return of Iranian supplies is diminishing as talks to revive a 2015 nuclear deal have been pushed back to August. Meanwhile, the United States is considering cracking down on Iranian oil sales to China as it braces for the possibility that Tehran may not return to nuclear talks or may adopt a harder line whenever it does, a U.S. official said.

In the United States, the recovery in oil drilling has been modest as producers restrained spending. U.S. oil rigs rose by seven to 387 last week, their highest since April 2020, energy services firm Baker Hughes Co said on Friday.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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