Crude oil has had an interesting August, but on the whole, prices are likely to end the month lower than they started it.
West Texas Intermediate shed some 6 percent this month, Bloomberg reports, and if it loses more today, it would be the sharpest drop since last October.
Brent crude is doing a little better, likely to end the month where it started it, around $72 per barrel even after it endured a dive to some $65 per barrel two weeks ago.
Oil prices have been battered by a number of events this month, chief among them the resurgence of Covid-19 in many parts of the world, including in the key Asian and U.S. markets. With the vaccine optimism of last year now only a distant memory, what official sources are calling the fourth wave of infections have wreaked havoc on oil demand outlooks just months after the immediate prospects of demand looked so clear and upbeat.
Countering the bearish effect of Covid-19, earlier this week, prices-especially WTI-got a boost from the disruption of oil production and refining operations in the Gulf of Mexico and the Gulf Coast thanks to hurricane Ida.
The hurricane prompted the shut-in of some 95 percent of Gulf of Mexico oil production and about 12 percent of U.S. national refining capacity. That meant taking offline 1.74 million bpd in oil production and 2.11 million bpd in refining capacity.
However, the effect of this disruption was short-lived, suggesting that the bearish factors were stronger. Besides Covid-19, these also include OPEC, which is meeting tomorrow to discuss whether to stick to its plans of adding 400,000 bpd to global supply every month until it restores all production that was cut during the pandemic.
Reports emerged earlier this week that the cartel may be considering a change of tack, with the Kuwaiti oil minister telling Reuters, "The markets are slowing. Since COVID-19 has begun its fourth wave in some areas, we must be careful and reconsider this increase. There may be a halt to the 400,000 (bpd) increase."
A later report, citing three unnamed sources from OPEC+, said that the cartel was most likely to stick to its current arrangement, further pressuring prices.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More