Oil prices in the London session today are bullish but remain on track to post their biggest weekly decline since March 2021, as travel restrictions to curb the spread of the COVID-19 Delta variant are raising concerns about fuel demand.
What you should know
The global benchmark for oil, the Brent crude oil futures is up 0.56%, currently trading $71.76 a barrel while the U.S oil, the West Texas Intermediate (WTI) crude futures is up 0.51%, currently trading $69.44 a barrel, still struggling to get back above the $70 trading zone. Both oil benchmarks have lost up to 6% this week, the most since March.
News from Japan suggests the country is increasing its emergency restrictions to more areas while China, the world’s second-largest oil consumer, has imposed restrictions in some cities and cancelled flights. These actions threaten fuel demand. In the United States, the world’s largest oil consumer, the daily new COVID-19 cases have climbed to a six-month high.
What they are saying
Howie Lee, an economist at Singapore’s OCBC bank stated that “The price action we see now is really a function of the macro picture. The Delta variant is now really starting to hit home and you see risk aversion in many markets, not just oil.”
ANZ said in a report that “At least 46 cities have advised against traveling, and authorities have suspended flights and stopped public transport. This could impact oil demand as it comes towards the end of the summer travel season.”
CMC Markets analyst Kelvin Wong stated, “In the short-term oil prices are likely to be stuck in a range-bound environment,” adding that the WTI will be trading between $66.30 and $75.70 per barrel. He said that oil’s upside has also been capped by improving crude supplies in the United States while non-farm payroll (NFP) data due later on Friday has lent a cautious air to trading.
Investor’s attention is now on the U.S unemployment data in the form of the NFP that is due to be released today, at the start of the New York trading session.