New Delhi: On Tuesday, oil prices fell for a second day as incidents of the highly infectious COVID-19 variant Delta spurred fresh transportation restrictions around the world, raising concerns about slower fuel demand growth.
At 0045 GMT, US West Texas Intermediate (WTI) oil futures were down 14 cents, or 0.2 per cent, to 72.77 dollars a barrel, extending Monday’s 1.5 per cent drop. After falling 2 per cent on Monday, Brent Crude futures fell 10 cents, or 0.1 per cent, to 74.58 dollars a barrel.
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Despite the viral outbreak, analysts believe that increasing vaccination can make the market expect a boost in demand.
“The narrative of the past few months has not changed: the viral fight is being won gradually, the global economy and oil demand are rebounding,” said Tamas Varga, a PVM Oil analyst.
The flare-up in the Delta strain occurs as the Organization of Petroleum Exporting Countries (OPEC), Russia, and allies, collectively known as OPEC+, prepare to consider loosening production restrictions in a meeting scheduled on July 1.
According to OPEC’s demand predictions, global oil supply would fall short of demand by 2.2 million barrels per day in the fourth quarter, providing producers some space to increase output. According to the predictions of some analysts, OPEC+ would increase production in August as the market tightens due to a significant rise in fuel demand in the US and China, the world’s two largest oil users.
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“Oil prices fell on concerns that OPEC+ will decide to meaningfully boost output later this week just as the Delta variant of the coronavirus spreads,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.
Spike in the variant has been forcing countries to impose strict restrictions on international travel. On Monday, unvaccinated Britons were subjected to new restrictions in Spain and Portugal, while 80 percent of Australians were subjected to harsher restrictions due to outbreaks of the virus across the country. As reported by Financial Times, talks on a transit corridor between the US and the UK have delayed as well, owing to worries over an increase in cases of the Delta type in the UK.