(Bloomberg) — Oil fell as a coronavirus resurgence raised concerns about demand ahead of an OPEC+ meeting this week that could see the alliance boost some halted output.
Futures in New York extended declines toward $72 a barrel. The infectious delta variant of the virus has resulted in a spike in U.K. cases and is taking a toll on mobility in some parts of Asia. While the crude market has tightened, the latest flare-up could play a part when OPEC+ gathers Thursday to decide on output levels in August.
Despite oil’s recent loss of momentum, prices are still up about 9% this month. Key regions including the U.S. and China are rebounding from the virus, while India’s biggest refiner is boosting fuel production. Futures and swaps in leading pricing locations are in a bullish backwardation structure, although the spread is narrowing in what could be early signs of some weakness.
Monday’s oil price drop, “if it continues for a few more days, could make the OPEC+ producer group extra cautious,” said Tamas Varga, an analyst at PVM Oil Associates. “The global economy and oil demand are recovering, oil supply is being effectively managed, therefore dips are probably viewed by ardent bulls as attractive buying opportunities.”
See also: Crude Stockpiles in China at 2021 Low as Refiners Ramp Up Runs
The U.K. on Monday reported the most new Covid-19 cases since January, and Hong Kong, Spain and Portugal all imposed new restrictions for visitors from the nation. Authorities are also racing to contain outbreaks in Australia. The resurgence may lead to export-focused refiners in Asia trimming processing rates.
Meanwhile, OPEC+ expects that the market will remain in deficit this year if it keeps production steady, according to data that technical experts will review on Tuesday ahead of the coalition’s main meeting later in the week. The group may boost daily output by 500,000 to 1 million barrels a day, RBC Capital Markets said in a note.
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