Oil markets lost ground for the eighth consecutive day yesterday. Brent oil futures went down by 0.28% during the session, closing at the 65.00 level. In contrast, West Texas Intermediate crude oil futures gained 0.02% during the session, breaking a seven-day losing streak and closing the session at the 62.33 level.
It seems that the oil markets have been heavily affected by the spread of the delta variant of the COVID-19 virus, which is believed to be more transmissible than other strains. Since the beginning of the pandemic, 212,597,446 cases have been reported across the world, as well as 4,444,678 associated deaths.
The United States leads in the number of infections, with 38,545,144 total cases as well as 645,058 related deaths. Other countries that have been heavily affected are India, Brazil, and Russia.
The quick spread of the virus is threatening oil demand levels, since it could push the government to restrict economic and social activities and could make OPEC+ reconsider its pledge to boost oil supply. In its latest meeting, the organization members voted to increase oil output given the recent increase in oil demand linked with the economic rebound.
“There’s a bit of buying on the dips across risk assets,” commented an analyst at Vanda Insights. “OPEC+’s move will depend on the quantum of price recovery and its sustainability, but the chances of a temporary suspension of the supply boost are looking quite strong.”
Another factor that is being linked with the collapse of oil prices is the relative strength of the US dollar, which is now close to a 9-month high despite recently losing some ground against a bundle of its main competitors. This dollar’s strength is being linked to a surge in risk aversion, which has made safe havens like the dollar relatively more attractive for investors.
To stop the spread of the virus, the governments have been trying to advance a massive vaccination campaign. So far, 4.93 billion doses have been distributed among the global population, with 1.9 billion individuals now fully vaccinated, which account for 24.4% of the total population.
By 5:45 GMT, Brent oil futures went up by 2.05%, hitting the 66.08 level. Similarly, West Texas Intermediate crude oil futures gained 1.92% during the session, reaching the 63.33 level.