Oil prices recorded significant losses during the week ending July 16 over the double whammy of supply concerns from the indecision of OPEC+ producers on their output policy after July and on demand fears induced by uncertainties over the COVID-19 Delta variant.
International benchmark Brent crude traded at $73.39 at 1100 GMT on Friday, posting more than a 2.35% drop from Monday when trade at 0720 GMT registered at $75.16 per barrel.
American benchmark West Texas Intermediate (WTI) traded at $71.87 at the same time on Friday, decreasing over 3.14% relative to $74.20 a barrel on Monday.
Although the UK’s confirmation of the lifting of almost all the remaining coronavirus restrictions by July 19 raises market optimism over short-term demand, the fast spread of the Delta virus variant is blurring the demand outlook in the long term.
A decline in China's crude imports by 3% year on year from January to June also contributed to the negative demand sentiment.
However, data from the US Energy Information Administration (EIA) showed that commercial crude oil inventories in the world's largest oil consumer decreased by 1.8% for the week ending July 9, higher than the market expectation of a 4.3 million-barrel draw.
The impasse between the United Arab Emirates and Saudi Arabia still remains unsolved, blocking the deal to determine the group’s production policy from August onwards.
Despite media reports on deliberations in finding a compromise to solve the issue, the UAE has denied such reports, commenting that a deal with OPEC+ on its baseline has yet to be reached. The country’s main objection is on what it says is the cartel’s outdated and unfair output baseline which is based on a deal inked in October 2018.
The group had previously agreed to gradually return 2.1 million barrels per day (bpd) of supply to the market during May through July, after which the curbs still in place would stand at 5.8 million bpd.
Until a new agreement is reached, it is expected that the current OPEC+ cut of 5.8 million bpd will be maintained.
By Sibel Morrow