Oil prices rose early on Friday but were still headed for their worst weekly performance since March, depressed by rising COVID cases in many countries and renewed travel restrictions in the world’s largest oil importer, China.
As of 8:41 a.m. EDT on Friday, WTI Crude was up 0.59% at $69.80. Brent Crude was trading up 1.14% at $72.10.
Both benchmarks, however, were down more than 5 percent for the week, the worst showing for oil prices since March this year.
This week, oil settled lower in three consecutive sessions amid fears that the faster-spreading Delta variant would slow fuel demand in China and the rest of Asia. China has reimposed some massive curbs in travel and stopped public transport in several cities as it tries to keep the worst flare-up of COVID since the original outbreak in Wuhan under control. Elsewhere across intensive fuel consumer Asia, Thailand and Malaysia reported record daily new cases on Thursday, the Philippines put its capital Manila on a new lockdown, and Japan reported record new cases in Tokyo. Some experts have called the emergency measures for Tokyo to be expanded nationwide.
While Asia is locking down again, the U.S. and Europe remain open despite the surge in Delta variant cases there, too.
The biggest concern for oil demand right now comes from China and the rest of Asia. China is ordering lockdowns and curbs in travel very early with just several dozen of new daily cases in its attempt to stop the spread. Those lockdowns are affecting millions of people, which could dent fuel demand.
“At least 46 cities have advised against travelling and authorities have suspended flights and stopped public transport. This could impact oil demand as it comes towards the end of the summer travel season,” Reuters quoted ANZ as saying in a report.
By Tsvetana Paraskova for Oilprice.com
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However, the momentum of the global economy will without any shadow of doubt prevail over the COVID concerns. Prices will soon resume their surge.
My optimism is underpinned by the continued growth of both the global economy and China’s at 6.3% and 8.3% respectively.
If during the height of the pandemic in 2020 and without the availability of vaccines, China managed with draconian measures to exit the lockdown earlier than any country in the world and ended the year importing on average 11.67 million barrels a day (mbd) or 14% higher than 2019, I am sure that with vaccines at its disposal and a roaring economy, China will soon overwhelm any new cases of the pandemic.
.
And while concerns about new COVID cases could slightly slow down the global demand for oil, they will never arrest its growth.
I am still optimistic that Brent crude could touch $80 a barrel during the third quarter of 2021.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Move along..