The spread of the Delta variant is raising some red flags, with new restrictions on visits implemented in Hong Kong, Spain, and Portugal in recent days. New flareups in cases have occurred in the UK and Australia, among other places. The Delta variant could pose some oil demand risks, and oil prices have tapped on the brakes as a result. Oil clung to small gains as the market traded in anticipation of an OPEC+ meeting this week while eyeing the spread of the delta variant of Covid-19, said Bloomberg.
The recent spread of the delta variant poses a threat to the global demand recovery. The strain has become dominant in France and Germany, and the U.K. on Monday reported most new Covid-19 cases since January. Close to half of Australia’s population is now in lockdown as the nation struggles to contain the spread of the strain. The resurgence may lead to export-focused refiners in Asia trimming processing rates.
The spread of the delta variant in Europe, Asia and Australia has resulted in new travel and mobility restrictions. Traders will also look to the industry-funded American Petroleum Institute report later Tuesday for signals about the nation’s crude and gasoline stockpiles, which fell in last week’s data. “People are buying the OPEC story that we need some extra barrels,” told Bob Yawger, head of the futures division at Mizuho Securities. “And you had a couple of weeks where you’ve had some pretty big draws on crude oil.”
At the start of the OPEC+ alliance meeting on Tuesday, Secretary-General Mohammad Barkindo praised the market’s strong fundamentals but cautioned that it’s “not completely out of the woods yet.” The OPEC secretary general urged prudence in returning supply to the market amid growing uncertainties around demand recovery.
Russia is having trouble reversing an oil production decline it implemented under its agreement with OPEC+. Russia has been producing some 10.42 million bpd of crude oil and condensates since the start of the month, which is lower than May’s average of 10.45 million bpd? Oilprice said.
Despite WTI hitting a two-year high, shale drillers are not rushing back with a wave of new drilling. “I’m still confident the producers will not respond” to the run-up in prices, said Scott Sheffield, CEO of Pioneer Natural Resources.
Brazil’s oil boom continues.Latin America’s largest oil producer Brazil is one of the worst affected countries globally by the COVID-19 pandemic. By March 2021 petroleum and natural gas production was in decline with total hydrocarbon output falling by nearly 3% year over year to an average of 3.6 million barrels of oil equivalent per day. Nevertheless, by April operations began to recover and the country’s economically critical oil output was rising. By May 2021 pre-salt oil production was just under 2.7 million barrels daily, a notable 14% increase compared to the same period a year earlier, making it responsible for 93% of Brazil’s oil output and 71% of total hydrocarbon production.
Oil prices have climbed nearly 50% this year as key economies such as the U.S., U.K. and China have reopened, buoyed by mass vaccination campaigns. Crude stockpiles in China, the world’s biggest importer of crude, have dwindled to the lowest this year. As India emerges from a deadly coronavirus surge, an uptick in local fuel consumption has prompted the nation’s biggest refiner to boost production.