Oil market sentiment is decidedly cautious this week as covid cases climb and U.S. crude inventories increase.

Despite the Friday trading session recovering somewhat from this week’s aggregate declines, the overarching sentiment on the oil markets is still that of caution, seeing China and the United States confronting COVID-19 case surges. Whilst tensions in the Persian Gulf added a new layer of geopolitical upside risk for prices, this was largely counteracted by the week-on-week hike in US crude inventories, OilPrice said.

Incident with multiple tankers in Gulf of Oman raises concerns in oil market.The status of at least four tankers in the Gulf of Oman is uncertain and another was reportedly hijacked by gunman believed to be from Iran. Lloyd List reported that the Panamanian flagged Asphalt Princess was the ship that was reportedly seized by armed men. The British Navy earlier Tuesday had warned of a “potential hijack” in the Gulf of Oman, and the British military’s United Kingdom Maritime Trade Operations warned ship operators that “an incident is currently underway” off of Fujairah, United Arab Emirates. The situation occurred as tensions between the West and Iran have been rising, and as the U.S. and other world powers have been trying to reach a new deal with Iran over its nuclear program, according to CNBC survey.

Brent crude oil futures settled down 59 cents, or 0.8%, at $70.70, while U.S. West Texas Intermediate (WTI) crude futures fell 81, or 1.2%, to settle at $68.28 a barrel. For the week, global benchmark Brent shed more than 6%, its largest week of losses in four months, and WTI tumbled nearly 7% in its biggest weekly decline in nine months. Rising coronavirus cases in top consumers U.S. and China weigh. Oil prices fell about 1% lower on Friday, posting to their steepest weekly losses in months, on worries that travel restrictions to curb the spread of the Delta variant of COVID-19 will derail the global recovery in energy demand. Crude futures also came under pressure as the dollar strengthened after monthly U.S. job growth came in higher than expected. A stronger dollar makes greenback-denominated oil more expensive for buyers in other currencies, Reuters told.

U.S. President Joe Biden said that COVID-19 cases in the United States, which have climbed to a six-month high, will go up before they come down and that the new Delta variant is taking a needless toll on the country. Japan is poised to expand emergency restrictions to more regions of the country, while China, the world’s second-largest oil consumer, has imposed curbs in some cities and canceled flights, Reuters said. “Increased travel restrictions in China have come under the microscope of traders and could become a key oil price mover as this month proceeds,” said Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois. Coronavirus cases worldwide surpassed 200 million on Wednesday, according to Reuters, as the more-infectious Delta variant threatens areas with low vaccination rates and strains healthcare systems.

The United States and China, the world’s two biggest oil consumers, are grappling with rapidly spreading outbreaks of the highly contagious Delta variant that analysts anticipate will limit fuel demand at a time when it traditionally rises in both countries. Nevertheless, in its July Oil Market Report, the Organisation of Petroleum Exporting Countries, OPEC, had stated: “The global economic growth forecast for 2021 remains unchanged at 5.5 per cent.”

The U.S. Energy Information Administration (EIA) said crude stockpiles rose by an unexpected 3.6 million barrels last week, while gasoline inventories fell by a bigger-than-forecast 5.3 million barrels. U.S. oil rigs rose two to 387 this week, energy services firm Baker Hughes Co said. Growth in the rig count has slowed in recent months as drillers continue to focus on capital discipline. 

The price of Bonny Light, Nigeria’s premium crude oil grade dropped to $71.24 per barrel, over fears of increasing United States stock and the spread of Delta variant. The price of Bonny Light and other crudes had risen to over $75 per barrel in July 2021, due mainly to improved vaccination during the period.

But the current slide would not affect the execution of Nigeria’s 2021 budget, which was benchmarked on $57 per barrel and 1.8 million barrels per day, (excluding Condensate), as the nation also produces between 300,000 – 400,000 of Condensate daily, Vanguard reported.