Oil prices fell early on Monday to start August with losses after posting a fourth consecutive month of gains in July.
Oil settled higher on Friday to end the fourth straight month of gains but erased Friday gains on Monday on resurging COVID cases globally, weak Chinese economic data, and higher oil supply from the OPEC+ group.
As of 11:05 a.m. EDT on Monday, WTI Crude was down 2.31 percent at $72.24 and Brent Crude was trading at $73.89, down 2.02 percent.
"Crude futures had more than reversed Friday's modest gains in the early hours of Monday's trading in Asia as headlines over the weekend brought mostly discouraging news on the Delta variant-led Covid resurgence marching across the globe," Vanda Insights said in a note early on Monday.
"Top-of-mind for the oil market was China, where the worst Covid outbreak in months has spread to two more parts of the country - Fujian province and the megacity of Chongqing - health authorities said on Saturday," Vanda Insights added.
China also saw its weakest manufacturing sector expansion in 15 months, according to the Caixin China General Manufacturing Purchasing Managers' Index (PMI).
The weaker economic data and resurgence of COVID cases combined with the higher production from the OPEC+ group to weigh on oil prices at the start of August.
OPEC alone is estimated to have pumped in July its highest oil volumes since April 2020-at 26.72 million barrels per day (bpd), up by up 610,000 bpd from June, the monthly Reuters survey found on Friday. As of August, the OPEC+ alliance is putting another 400,000 bpd on the market.
This week, the market will be watching the new Iranian president Ebrahim Raisi taking office and the potential implications for the nuclear talks, especially in light of last week's drone attack on an Israeli-linked oil tanker offshore Oman, after which the U.S. and the UK joined Israel in blaming Iran for the attack.
"Upon review of the available information, we are confident that Iran conducted this attack, which killed two innocent people, using one-way explosive UAVs, a lethal capability it is increasingly employing throughout the region," U.S. Secretary of State Antony Blinken said Sunday.
By Tsvetana Paraskova for Oilprice.com
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Comments
However, I can say with confidence that the global economy which is growing at 6.3% this year, or more than double its growth in 2019, will overwhelm the Delta variant-led COVID resurgence with oil prices resuming their surge.
We must also remember that China’s oil imports in 2020 even at the height of the pandemic averaged 11.67 million barrels a day (mbd) or 14% higher than 2019. So the outbreak of COVID in China will not affect its economic performance and will be dealt with as effectively as in 2020.
Moreover, the global oil market is robust enough to accommodate the 610,000 barrels a day (b/d) that OPEC+ added to global oil supplies in June.
A lifting of US sanctions on Iran may not see the light of day soon or ever because the positions of the United States and Iran are irreconcilable.
Israel understandably blamed Iran for the attack on the Israeli-owned Mercer Street tanker off the coast of Oman on the 29th of July. Israel should have known that Iran would retaliate against Israeli attacks on Iranian oil tankers bringing Iranian crude supplies to Syria. Israel is reaping what it has been sowing.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Still no apparent recovery in the US economy from "The Lockdown" going on 18 Months plus now tho no raging recession either.
Just a very low priced environment where pricing power is hard to sustain often called a "growth recession."
Not bullish for raw commodity inputs as what is in demand is in OEM finished product going on forever now.
Long $tsla Tesla Motors
Strong buy