Oil Price Fundamental Daily Forecast – IEA, OPEC Reports Differ on Demand Outlook, Creating Uncertainty

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are extending their earlier losses on Thursday after the International Energy Agency (IEA) said the spread of the Delta variant of the coronavirus would slow the recovery of global oil demand.

Meanwhile, in its monthly report that also came out on Thursday, the Organization of the Petroleum Exporting Countries (OPEC) stuck to its prediction of a strong recovery in world oil demand in 2021 and 2022, despite concerns about the spread of the virus.

At 15:17 GMT, October WTI crude oil is trading $68.76, down $0.26 or -0.38% and October Brent crude oil is at $71.06, down $0.38 or -0.53%,

Spread of COVID-19 Delta Variant Knocks Oil Demand Outlook – IEA

Rising demand for oil abruptly reversed course in July and is set to proceed more slowly for the rest of the year due to the spread of the COVID-19 Delta variant, the International Energy Agency said on Thursday, Reuters reported.

“Growth for the second half of 2021 has been downplayed more sharply, as new COVID-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the Paris-based IEA said.

“We now estimate that demand fell in July as the rapid spread of the COVID-19 Delta variant undermined deliveries in China, Indonesia and other parts of Asia,” it said in its monthly oil report.

OPEC Sticks to Oil Demand View Despite Virus, Sees More U.S. Shale Coming

OPEC on Thursday stuck to its prediction of a strong recovery in world oil demand in 2021 and further growth next year, despite concerns about the spread of the Delta coronavirus variant that has weighed on prices.

“The global economy continues to recover,” OPEC said in the report. “However, numerous challenges remain that could easily dampen this momentum. In particular, COVID-19-related developments will need close monitoring.”

Daily Forecast

The IEA issues a clearly bearish report, and OPEC follows with a slightly bullish demand outlook. The contradictory nature of the reports creates uncertainty for traders. And when there is uncertainty, investors sell out long positions, and bearish traders add to their shorts.

OPEC could easily shift their outlook to the bearish side if the COVID crisis escalates. Furthermore, the cartel is also calling for the U.S. to increase shale production, which would also be a bearish development. Meanwhile, the Biden administration is asking U.S. companies to produce more oil in an effort to reduce gasoline prices.