Oil Prices Unlikely To Overheat As Delta Variant Weighs In

A spike in the Delta Coronavirus cases is likely to hold back a demand recovery this year as oil prices struggle to break out of current ranges.

Oil prices for West Texas Intermediate (WTI) fell 1% to $68.50 a barrel. Tuesday’s expiring Brent crude futures settled at $72.99 a barrel, down 0.6%.

Even though they are not far from their July highs, both benchmarks posted losses in February for the first time since March. WTI Crude declined 7% in July, while Brent Crude futures lost 4%.

Hurricane Ida caused catastrophic damage to Louisiana’s power grid after it made landfall as a Category 4 hurricane on Sunday. At least 94% of offshore Gulf of Mexico oil and gas production was shut down because of the hurricane.

In the short term, oil prices are unlikely to overheat as the Delta variant weighs on demand and sentiment.

The International Energy Agency stated this month that the spread of the Delta variant would lead to a somewhat slower growth in oil demand for the remainder of 2021.

To date, the Organization of Petroleum Exporting Countries has remained confident that demand will recover substantially.

In July, the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, agreed to raise output by 400,000 barrels per day a month from August until the current reductions of 5.8 million barrels per day are phased out.

The COVID-19 outbreak is causing some analysts to suggest that the group may reconsider raising output at its meeting on Wednesday. Consumption was downplayed by others.

In light of rising oil demand and inflation figures, OPEC+’s decision to boost production made sense. If demand slows down because of possible COVID Delta problems, the question might be whether OPEC+ sticks to its plan