Oil prices recorded sharp drops by falling more than 5% during the week ending August 20 from low demand concerns with the worse-than-expected economic outlook in China and a surprise build in US fuel stocks.
International benchmark Brent crude traded at $65.91 at 1130 GMT on Friday, posting more than a 5.24% fall from Monday when trade at 0609 GMT registered at $69.56 per barrel.
American benchmark West Texas Intermediate (WTI) traded at $62.97 at the same time on Friday, decreasing over 6.23% relative to $67.16 a barrel on Monday.
Oil prices started the week with demand worries as the economic outlook in the world’s second-largest oil consumer, China, raised investor concerns and weighed on prices. Oil demand in the country was curbed due to the spread of the Delta coronavirus variant. Industrial production in the country failed to meet expectations, recording a 6.4% rise in July from the same month a year ago, relative to market estimates of a 7.8% increase. Retail sales were up 8.5% but underperformed compared to the 11.5% expectation.
To allay virus-induced demand fears, investors were relieved when OPEC producers and allies (OPEC+) announced their decision to stick to the previous output schedule despite calls from the US administration to increase oil production to combat rising domestic gasoline costs.
Earlier in August, the group had agreed to raise output by 400,000 barrels per day from August to December and extend its production cut agreement from April 2022 to December 2022.
Another negative impact on oil prices was the rise in US fuel stockpiles last week.
The US Energy Information Administration (EIA) announced Wednesday that the country’s gasoline inventories rose by 700,000 barrels to 228.2 million barrels during the week ending August 13. The hefty build was mainly caused by less driving activity during the country’s Memorial Day weekend last week.
Crude oil inventories, however, decreased by 3.2 million barrels, or 0.7%, during the same period.
While the approaching end of the summer driving season in the US and Europe began weighing on oil prices, the global surge of the highly contagious Delta variant was another factor exerting downward pressure on prices, fueling demand concerns.
While Japan's emergency lockdown is extended, cases in South Korea, Malaysia, the Philippines, Vietnam, and Thailand are on the rise. South Korea reported over 2,100 new coronavirus cases on Thursday, the second-highest daily increase since the Asian country's coronavirus outbreak last year.
Thailand also set a new daily coronavirus death record on Wednesday, with 312 individuals dying in the last 24 hours, bringing the country's death toll to 8,285.
COVID-19 cases in Australia were at an all-time high, and New Zealand's COVID-19 lockdown was extended for another four days after the country reported 11 new cases.
On Thursday, health officials in Germany reported 8,400 new cases, the second day in a row that the number of new infections topped 8,000.
By Sibel Morrow