Traders are now refocusing on the spread of the Covid-19 pandemic and global concerns over the new variants’ expansion are weighing on prices, despite tightening oil supplies globally.
That’s what Rystad Energy’s oil markets analyst Louise Dickson said in a statement sent to Rigzone on Monday, adding that the excitement in oil prices that led Brent close to reaching $78 per barrel has all but dissipated.
“Infections are on the rise in several countries around the world and if restrictions need to be added or reinstated again, they could have an impact on economic growth, and consequently on oil consumption,” Dickson said in the statement.
“The latest wake up call that the pandemic is not yet behind us came from the G20 over the weekend, as officials pointed out speed bumps in vaccination campaigns that allow the pandemic to spread, threatening the global economic and oil recovery,” the Rystad Energy representative added.
In the statement, Dickson noted that the Delta variant continues to spread and trigger restrictions, in particular in Asia.
“Our real time data has captured a drop of 40 percent in domestic aviation activity in China versus April 2021 levels,” Dickson said. “Malaysia is still under a full lockdown, which has sent the road traffic index down to 52 percent,” the analyst added.
Dickson also outlined that the ongoing deadlock in OPEC+ negotiations over the alliance’s output from August was bullish at first glance but has now sowed enough confusion and discord that the market doesn’t fully trust the alliance to maintain a steady oil price gains path.
“The prospect of unrestricted oil output by OPEC+ producers, in conjunction with what could be a new pandemic wave, is a bearish scenario that has kept a reasonable cap on price gains and helped cut down on frothy speculation,” Dickson said.
Sharp Demand Growth Deceleration
In a separate statement sent to Rigzone on Monday, Standard Chartered highlighted that its view has been that global oil demand growth will decelerate sharply from August onwards after sharp increases in June and July.
“We think that the oil market is now starting to become concerned about the slowdown and the effect of coronavirus variants, partly because of questions over the ability of OPEC+ to react to changing conditions after the failure of its latest meeting,” analysts at Standard Chartered said in the statement.
“The evidence from mobility statistics is that, while transportation demand is still improving in many countries, demand flattening has started in some key consumers and conditions are deteriorating in others,” the company added.
Standard Chartered outlined that there had been continued improvement in Germany, a flatlining in the U.S. and UK, and a clear downtrend in Russia.
The latest information from the World Health Organization (WHO) shows that Covid-19 cases have risen consecutively over the past three weeks, following eight consecutive weeks of declines. Global Covid-19 deaths rose week on week for the first time since April after nine weeks of consecutive declines.
As of July 12, 5.08pm CEST, there have been 186.6 million confirmed cases of Covid-19 around the world, with more than four million deaths, according to the latest WHO figures. As of July 12, more than 3.1 billion vaccine doses had been administered around the world, the most recent WHO data showed.
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