Oil Demand and Covid Delta

​Futures in New York fell as much as 1.9% on Monday  traders considered the demand implications of a Covid-19 resurgence in several regions and slowing economic growth in China. A stronger U.S. dollar also weighed on prices, making commodities priced in the currency less attractive.

OPEC and its allies have been unable to agree on a supply increase, creating volatility in the market and pushing crude to its first weekly loss since May last week. Fuel consumption in economies such as the U.S. and China has boosted oil prices this year amid tight global supplies.  China’s slowing economic recovery and the spread of the delta variant may threaten the global demand for oil and the commodity’s trajectory so far this year.

The economic data in China is startening to soften. Economists see China’s growth as easing in the second quarter to around 8% which is in contrast to the record gain of 18.3% in teh first quarter. In addition, retail sales and industrial production are expected to moderate, too. With these factors and the delta variant spreading exponentially, there is going to be more uncertainty about the demand recovery.

OPEC+ abandoned meetings last week after a dispute between members over production cuts, and one week later, no deal is in sight. This is causing more uncertainty about oil supply to the market. The International Energy Agency will release its monthly report on Tuesday and OPEC will release its own monthly report on Thursday.