U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Friday, heading for a seventh straight losing session and a weekly decline of about 6%. The main catalyst behind the current weakness is surging cases of the COVID-19 Delta variant, which is dampening the outlook for fuel demand.

At 11:30 GMT, October WTI crude oil futures are trading $63.08, down $0.42 or -0.66% and October Brent crude oil is at $66.01, down $0.44 or -0.66%.

Dollar-denominated crude oil was also be pressured by broader investor risk aversion that sent the U.S. Dollar to its highest level in nine-months amid concerns the U.S. Federal Reserve is considering reducing stimulus this year.

Surge in Global COVID-19 Cases Likely to Weigh on Fuel Demand

China has imposed new restrictions with its “zero tolerance” coronavirus policy, affecting shipping and global supply chains, and the United States and China have imposed tit-for-tat flight capacity restrictions, according to Reuters. Meanwhile Delta variant outbreaks in Australia and New Zealand have also sparked strict lockdowns.

Traders are also worried the approaching end of the U.S. peak gasoline demand season and end of summer holidays in Europe and the United States are also set to sap oil demand.

Daily Forecast

It’s hard to find anything bullish in the news about crude oil. Although there is the possibility that OPEC and its allies hold production levels steady or even roll them back when they set policy at their meeting the first week of September.

However, remember that as of last week, OPEC hadn’t even acknowledged the possibility of lower demand in its monthly report. Meanwhile, the International Energy Agency (IEA) is predicting a drop in demand.

Prices could drop even further over the short-run if OPEC finally concedes the negative impact the new surge in COVID-19 cases is having on demand.

“The spread of the Delta variant amid moderating economic growth and the prospects of tighter monetary policy are creating short-term ripples in the commodity market,” ANZ commodity analysts said in a note.

Story continues

“Increasing restrictions on mobility are raising concerns for oil demand.”

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire


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