Brent Crude Hits $70 With Delta Variant Gaining Traction

In spite of upticks in COVID-19 cases around the world, oil prices flatlined on Wednesday following four straight days of declines as investors remain concerned about fuel demand.

During London’s mid trading sessions, Brent crude traded near $70 a barrel, with West Texas Intermediate futures rallying by 0.8% to $67.13 a barrel.

Brent bulls seem to be in a better mood following a period of hovering around a crucial technical resistance area of $68 a barrel. Due to lower highs formed over the last few weeks, this key price band area has been under significant downward pressure.

Short-term, the oil market may be volatile with frequent pullbacks due to falling crude prices, while European and Indian demand may be hit hard.

Amidst weaker U.S. economic data, the progress of the Delta variant, and concern about the state of Afghanistan, the financial markets are generally turning sour.

In the world’s largest economy more supply is set to hit the market if official forecasts prove right, further weighing concerns of the energy market getting saturated with COVID-19 caseloads gaining momentum

According to the government’s Energy Information Administration’s monthly drilling output report, U.S. shale oil production is expected to reach 8.1 million barrels per day in September, the highest level since April 2020.

Though market sources, citing figures from the American Petroleum Institute on Tuesday, reported a fall in crude oil and gasoline inventories last week. However, distillate inventories rose.

In order for energy consumption to fully recover, it is crucial that aviation, particularly long-haul flights, resumes.

The resurgence of the COVID-19 pandemic at emerged markets in addition to continued epidemics across the globe, is having an impact on oil prices.

It is unlikely that governments will fully remove quarantines and social-distancing controls until there is stronger evidence of outbreaks being contained.