West Texas Intermediate Oil has recently made several attempts to settle above the $70 level but failed to gain additional upside momentum and pulled back.
However, WTI oil remains close to this psychologically important level and has a good chance to get back to yearly highs in the remaining months of this year.
It is already clear that coronavirus-related concerns have failed to put big pressure on oil as many traders were ready to buy any significant pullback. As a result, WTI oil has quickly rebounded from the $62 level to the $70 level.
While the situation with coronavirus remains a big concern for oil traders, recent data suggests that the number of new daily cases in the world has started to decline.
Importantly, the number of daily deaths has begun to decline as well. Watching this grim data may be more important to the analysis of potential coronavirus-related restrictions around the world as governments will likely focus on critical cases and deaths rather than on total caseload as vaccination progresses.
Meanwhile, recent inventory reports indicated that crude inventories continued to decline.
According to the latest EIA Weekly Petroleum Status Report, US commercial crude inventories declined by 7.2 million barrels from the previous week.
US domestic oil production increased from 11.4 million barrels per day (bpd) to 11.5 million bpd but it will take a hit in the upcoming reports due to the negative impact of Hurricane Ida.
OPEC+ has recently decided to stick to its plan to raise oil production by 0.4 million bpd per month as the organization believed that demand recovery was strong despite challenges presented by the spread of the Delta variant of coronavirus.
In fact, OPEC+ increased its demand growth outlook for 2022 to 4.2 million bpd. The economic rebound continues at a robust pace thanks to the strong support from the world’s central banks and governments, and demand for oil looks strong as well.
The key question for the oil market is whether the world will have to deal with another wave of the virus at the beginning of the flu season in the Northern Hemisphere.
More coronavirus-related restrictions may put pressure on demand growth, but governments’ desire for new lockdowns appears limited except for countries like Australia and New Zealand, which are located in the Southern Hemisphere.
For more information visit www.eia.gov
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