Oil prices dipped on Thursday as the International Energy Agency (IEA) warned that the spread of the coronavirus’s Delta variant would stymie global demand recovery.
Brent oil futures were down 26 cents, or 0.36 percent, at $71.18 a barrel by 11:21 a.m. GMT, after reaching a session high of $71.90 earlier. West Texas Intermediate (WTI) crude futures in the United States fell 38 cents, or 0.55 percent, to $68.
According to the worldwide energy watchdog’s monthly report, surging demand for oil changed course in July. It projected to drop for the remainder of the year after the latest wave of COVID-19 infections pushed countries to reintroduce restrictions.
The Paris-based IEA said that growth in the second half of 2021 severely lowered. This happened as new COVID-19 limits enacted in several key oil-consuming nations, mainly Asia, appear poised to cut mobility and oil use. They believe that demand declined in July due to the quick spread of the COVID-19 Delta variant. The new strain hampered delivery in China, Indonesia, and other Asian countries.
The IEA estimated a 120,000 barrel per day (BPD) drop in demand last month. Expected growth in the second half of the year would be half a million BPD lower than projected last month. Some variations would be due to data corrections.
Despite fears about the virus’s spread, the Organization of Petroleum Exporting Countries maintained its forecast of a significant recovery in global oil demand in 2021 and 2022 in its monthly report.
That comes a day after the US pushed OPEC+ to increase oil output to combat rising gasoline prices. OPEC+ sees it as a danger to global economic recovery.
OPEC decided in July to increase output by 400,000 barrels per day (BPD) above the previous month. They will begin in August, until the remainder of its record cutbacks of 10 million BPD, or nearly 10% of global demand, are completed in 2020. According to the Biden Administration, the recently agreed-upon production increases will not entirely offset past production limitations enforced during the pandemic, ANZ said in a note.