Oil Price Fundamental Daily Forecast – Traders Shrug-Off COVID-19 Variant Concerns, Focus on OPEC+ Meeting

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher after reversing earlier losses. The price action is being driven by renewed hopes that the pace of the demand recovery will be enough to overcome the impact of new outbreaks of the highly contagious Delta variant of the coronavirus.

At 12:54 GMT, September WTI crude oil is trading $72.61, up $0.41 or +0.57% and September Brent crude oil is at $74.54, up $0.40 or +0.54%.

New Worries Over COVID-19 Delta Variant

The growing concerns over the increase in the COVID-19 Delta variant spooked a few of the weaker longs out of the market on Monday, but today’s price action suggests the news isn’t likely to develop into a trend changing event. Due to the rapid pace of the vaccinations, traders have grown relatively immune to COVID-19 developments, but if the new surge eventually leads to large scale shutdowns in Asia, we may see a reaction since Asia is a huge demand center.

The problem isn’t unique to Asia either. Spain and Portugal, favorite summer destinations for Europeans, imposed new restrictions on unvaccinated Britons on Monday, while 80% of Australians faced tighter curbs due to flare-ups of the virus across the country, Reuters reported.

Ahead of Talks, OPEC Forecasts Point to Oil Supply Deficit in August

OPEC+, including Russia, is set to meet on July 1 to discuss easing their supply curbs. Analysts expect OPEC+ to step up supply in August as the market has tightened on strong growth in fuel demand in the United States and China, the world’s two biggest oil consumers.

OPEC+ cut output by a record 9.7 million bpd last year as demand collapsed when the pandemic first struck. As of July, the curbs in place will stand at 5.8 million bpd.

Ahead of the OPEC+ meeting, OPEC’s forecasts point to an oil supply deficit in August and in the rest of 2021 as economies recover from the pandemic, suggesting the group and its allies have room to raise output at a meeting this week.

OPEC’s latest forecast of the demand for its crude suggests, if output levels stay the same, OPEC supply will fall short of expected demand by 1.5 million bpd in August. The shortfall widens to 2.2 million bpd in the fourth quarter.