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The Resurgence of the Virus Leads to Increase the Oil Prices

Despite concerns that the Virus resurgence could halt the rebound, oil managed to post its first weekly increase in three weeks on signs that global demand is holding up. Last week, futures in New York increased 0.2 percent, totally recouping a Monday selloff sparked by the quickly spreading delta variation. In addition, fuel demand and road travel from the United States to Asia and Europe are holding up well, indicating that the economy hasn’t been derailed and global stockpiles continue to drop.

Ed Moya, the senior market analyst at Oanda Corp, said, “The fact of the matter is that we’re not going to see, at least in the U.S. and in Europe, a massive return to strict lockdown.” Crude has gained roughly 50% this year due to ongoing immunization programs that have prompted reopenings.

According to data released this week, gasoline demand in several of the world’s largest consumers has returned to normal. Meanwhile, OPEC+ and U.S. shale producers have shown restraint in re-entering the market with closed supply. The 7.5 percent price drop came just one day after the Organization of Petroleum Exporting Countries and its partners, led by Saudi Arabia and Russia, agreed to resume production that had been halted during the outbreak gradually.

The slight rise by OPEC+ allayed fears of oversupply. According to a group of analysts at Bank of America Corp., the current drop in Prices represents a buying opportunity, and Brent prices should exceed $100 per barrel next year. Schlumberger and Baker Hughes Inc. said this week that the recovery in the U.S. shale area would likely stagnate this year as companies keep expenditure in check.The shale industry is mostly resisting adding new supply, despite a substantial rise in petroleum Prices in 2021. Despite this, the Virus continues to represent a threat. For example, the opening ceremony of the Olympics in Tokyo began in a practically empty stadium amid a record number of new diseases linked to the games.

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