The virus is coming back, OPEC may compromise, U.S. oil recorded its biggest weekly decline since March. Provider FX678

On Friday (July 16) U.S. oil closed up 0.16 U.S. dollars, or 0.22%, and settled at 71.81 U.S. dollars per barrel; Bulk Oil rose 0.12 U.S. dollars, or 0.16%, to close at 73.59 U.S. dollars per barrel; due to the new crown epidemic The comeback threatens the prospects for global fuel demand in the near future. News that OPEC+ may reach a compromise has triggered oversupply concerns and put pressure on oil prices. The strengthening of the US dollar this week has also weakened the attractiveness of US dollar-denominated commodities.

The rapid spread of the Delta virus variant is triggering new movement restrictions. The United Kingdom is considering restoring some restrictions, Singapore has closed hundreds of nightlife venues, and the mask order has also been restored in Los Angeles County.

At the same time, the crude oil market is facing the possibility of OPEC+’s increase in supply, because the UAE and Saudi Arabia repair the cracks, and the differences between the two countries have previously hindered OPEC+’s decision-making process.

John Kilduff, a partner at Again Capital LLC, said “The oil market has suffered a double blow this week: the compromise agreement between OPEC+ and the UAE indicates that eventually more supply will enter the market; another factor is the impact of the Delta mutant virus, which has a negative impact on demand recovery. The pace of development poses a threat.”

Analyst Michael Lynch said that the surge in infections with the Delta variant strain has caused traders to worry that demand growth will stall, at least for a few months. In addition, even if Saudi Arabia and the United Arab Emirates reach a compromise, the OPEC+ agreement may break, which means that the organization will not continue to limit crude oil production to push up prices.

Despite the correction, the price of crude oil has soared by about 13% in the past three months due to the introduction of global vaccines to help restore economic activity. The International Energy Agency, Citigroup and other institutions all expect the market to become more tense in the coming months.

Bank of America analyst Francisco Blanch said in the Global Energy Weekly that the US oil maturity spread has recently strengthened, indicating that the supply at the Cushing Center in Oklahoma may fall below 30 million barrels in the next few weeks, but by later this year , Canada and the United States are expected to increase production, which should curb the supply gap.

After the second quarter’s shutdown and maintenance, Canadian production will rebound, and resume more than 400,000 barrels per day in the fourth quarter. During the same period, US supply will increase by more than 300,000 barrels per day. Due to lower profit margins, lower refinery turnover and the closure of PADD 2-4 refinery capacity, the average operating rate of US refineries is unlikely to be much higher than current levels.

Concerns about recent demand are causing the structure of the US crude oil market to weaken. Although the recent delivery month contract is still at a premium (this situation is called a spot premium, indicating a tight supply), it has been significantly eased in some parts of the forward curve.