Oil prices are down 3%… and Brent crude is less than $67
With the increase in Corona injuries and the recovery of the dollar
Oil prices deepened their losses today, Wednesday, by more than 3%, coinciding with the increase in infections with the Corona virus globally, and fears of a return to the economic closure.
By 10:50 am GMT, the price of West Texas Intermediate crude – September delivery – fell 3.4% to $ 63.47 a barrel.
And Brent crude, the benchmark – for October delivery – fell 2.78% to $ 66.33 a barrel, after touching its lowest level since May 24 at $ 67.06 earlier in the session.
Longest losing streak
At the beginning of Wednesday’s trading, oil prices fell for the sixth consecutive day, in the longest successive series of losses since February 2020.
The drop in prices came with fears of a drop in demand for fuel, coinciding with the rise in cases of the Covid-19 virus around the world, as well as the sudden increase in US gasoline stocks and the recovery of dollar prices.
The 6-day series of losses caused WTI to decline more than 7%, while Brent crude fell more than 6%, the longest losses since the 6-day decline for both contracts that ended on February 28, 2020.
The decline in oil prices reflects concerns about the increase in infections with the Corona virus caused by the delta mutator, with the number of virus-related deaths rising in the United States, the world’s largest oil user, over the past month.
On Tuesday, America announced more than 1,000 deaths from Covid-19, equivalent to about 42 deaths per hour, as the delta variable continues to destroy parts of the country with low vaccination rates, Reuters reported.
Corona-related deaths in America rose over the past month, averaging 769 deaths per day, the highest rate since mid-April.
Crude demand forecast
“Crude oil prices continue to show around mid-to-late summer support levels – $65 for WTI and $67 for Brent,” said Craig Erlam, chief market analyst at OANDA.
He added that slowing growth in China – the world’s largest oil importer – caused by the new restrictions in response to the rise in Covid-19 cases and some weakness in US data over the past week, led to weak oil prices.
For example, a move below $65 in WTI could send prices back to the second quarter trading ranges between $57 and $65, which would be a significant drop from the levels seen in oil prices in the past two months.
US gasoline stocks
The unexpected rise in US gasoline stocks last week also heightened concerns about slowing demand, since gasoline demand usually peaks during the Northern Hemisphere summer.
The Energy Information Administration said Wednesday that gasoline inventories rose by 696,000 barrels to 228.2 million, versus analysts’ expectations for a 1.7 million barrel decline.
It added that US crude stocks fell 3.2 million barrels last week to 435.5 million barrels, the lowest level since January 2020.
The peak summer driving season in the United States will end soon as the country prepares to ramp up production, said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
US shale oil production is expected to rise to 8.1 million barrels per day in September, the highest level since May 2020, according to the EIA’s monthly drilling productivity report.
Kikukawa said oil prices will remain under pressure in the short term from seasonal factors and epidemic concerns.