Oil prices fall more than 7%. OPEC+ Agreement and Delta Variant Pressure Quotes

The prices of a barrel of crude, in the two reference contracts, are falling more than 7% this Monday and trading below 70 dollars on a day when investors reflect in prices a combined effect of the agreement reached by the Organization of Countries Oil Exporters and allied countries of the organization (OPEC+) this Sunday and the uncertain evolution of the pandemic situation with the dissemination of the Delta variant.

The August contract of US WTI trades down 8.5% to 66.03 dollars a barrel, while Brent prices (benchmark in European markets) for September 2021 fall 7.01% to 68 .43 dollars a barrel.

The OPEC+ agreement on production levels for the coming months relieves the markets, which were anticipating sharp price movements in case the impasse is not released.

The arm wrestling, born out of the UAE’s refusal of a specific proposal to increase production, ended on Sunday with the countries agreeing on an additional production of 400,000 barrels a day starting in August. Altogether, a total of two million additional barrels per day will reach the market by December this year.

However, the expected recovery in consumption with the progressive lifting of pandemic restrictions could be threatened, analysts consider, with the spread of the Delta variant of the new coronavirus, which is more contagious and more aggressive. Which would mean that the market would have more oil available thanks to the agreement, but with consumption again substantially reduced compared to pre-pandemic times.

Quoted by the specialized website MarketWatch, an analyst at UBS bank believes that “with the closing of the agreement, investors now have more clarity regarding the supply of oil in the medium and long term. Investors’ attention must now shift to the reopening of the economy.”

Even with the significant drops on Monday, the forecast is still for a summer with a “tight” oil market and with prices on the rise again, according to some analysts.

Ed Morse, global leader in the area of research in Citigroup’s raw materials, this Monday morning devalued in statements to Bloomberg the declines in oil, considering that “the stocks falling” and “significantly higher demand despite the pandemic exploding because of the Delta variant” will make the 400,000 barrels a day prove, by the end of the summer, to be “a pittance”, says the analyst.

Source: Expresso by expresso.pt.

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