The price of a barrel of Brent crude oil won't fall below $60, according to analysts interviewed by Tass on Wednesday.
Those analysts pin the recent price drop not on the OPEC+ decision to ramp up production quotas, but rather on the mounting fears that a rise in Covid-19 cases-particularly the Delta variant-will stall an economic recovery and hence oil demand.
The price of Brent crude oil fell sharply on Monday, just a day after the OPEC+ meeting agreed to add 400,000 barrels of oil per day back into the market as of August, and every month thereafter until the entire production agreement for the group has been unwound.
Brent slid more than 7% on Monday, but has since rebounded. On Wednesday, despite the EIA's and API's unfavorable inventory report that showed a surprise building crude oil stocks in the United States, the price of Brent crude rose more than 4% to $72.24 per barrel.
According to the analysts interviewed by Tass, Brent will hover in the $60-$70 range and will likely not fall below that threshold because additional lockdowns are unlikely despite the Delta variant.
Vasily Tanurkov, director of corporate ratings group at Arca, said that the price dropoff was due to a variety of events that came to a head on Monday.
"If you look at what basically happened on Monday in the financial markets, then almost everything collapsed: stock markets, Asian, European, almost all raw materials fell. This was more due to fears about a new wave of coronavirus: the incidence in the world is growing, and especially in Southeast Asia. Accordingly, this could lead to stagnation in global demand, including for oil," Tanurkov told Tass.
Dmitry Marinchenko, senior director of the group for natural resources and commodities of Fitch also agrees that oil will sit in the $60-$70 range, because this is the level that is "comfortable for most oil producers."
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More