Oil prices dip below the $70 dollars per barrel mark for the first time since July; as the covid-19 spread and its new Delta variant are imposing new movement restrictions; therefore, threatening demand recovery.
Firstly, rising tensions in the middle east are also threatening oil supply, as Reuters reports. Brent crude oil futures rose by 18 cents, 0.26%, to $70.56 a barrel; after earlier dipping below $70 for the first time since July 21.
Secondly, the U.S. West Texas Intermediate crude rose 20 cents, 0,29%, to $68,35. This Wednesday both contracts fell by more than $2 a barrel. One of the largest losses in many weeks.
Thirdly, the covid-19 spread and its new Delta variant has the market on a wire; in fact, Japan is poised to expand emergency restrictions to more prefectures; while China, the world’s second-largest oil consumer, has imposed curbs in some cities; and has also cancelled flights, threatening fuel demand.
Moreover, an analyst at consultancy FGE said to Reuters this Thursday, “China is now facing its most challenging COVID-19 crisis; since the initial outbreak was brought under control.”
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Global oil demand recovery could be hit after Middle East tensions
In addition, in the U.S., the number one oil consumer, covid-19 cases hit a six-month high with more than 100,000 infections, reported on Wednesday; according to a Reuters poll.
However, analysts from investment bank UBS said they expect oil prices to resume their upward trend despite pandemic concerns, projecting Brent crude will trade between $75 and $80 per barrel in the second half of 2021.
On the other hand, belligerent tensions are rising in the middle east. Early on this Thursday, Israeli jets hit on supposedly rocket launcher sites in Lebanon; in response to the rockets launched to Israel from Lebanese territory, Israel responded with heavy fire; escalating tensions also with Iran.
Furthermore, the fire exchange came after an attack on a tanker off the coast of Oman last Thursday, which Israel blamed on Iran. Two crew members, a Briton and a Romanian, were killed. Iran denied any involvement.
Additionally, when asked if Israel was prepared to strike Iran; Israeli Defense Minister Benny Gantz told YNet news on Thursday “yes.” Finally, this war tensions are coming just as Iran is on talks with Western powers to bring the nuclear deal back. After the havoc, seems unlikely that Iran could reach a deal; consequently, offsetting recovery possibilities of global oil demand recovery.
