West Texas Intermediate Crude Oil futures dropped by 0.78% yesterday, closing the session at the 68.75 level and losing ground for the second consecutive day. Similiarly, Brent oil futures fell by 0.79% during the session, closing at the 72.04 level and dropping for the second consecutive day.
Oil has been tumbling mainly because there have been signs of a weak economic recovery now that the delta variant is spreading and governments are imposing restrictions on economic and social activities.
The fact that Saudi Aramco announced on Sunday that it will cut October prices for Asia, which is a sign that global markets are well supplied, also caused negative pressure in the markets. Many interpret this as an attempt to compete on price with other oil producers and increase the company's market share.
Despite this, Hurricane Ida has caused US supply to be limited. According to the U.S. Bureau of Safety and Environmental Enforcement (BSEE), 93% of crude oil production, which is about 1.7 million barrels per day, and 86% of natural gas output, or 1.9 billion cubic feet per day, are currently shut down due to power shortages in the Gulf of Mexico. The storm also caused an oil spill in the gulf, the source of which is believed to be in the Bay Marchand area.
Previously, OPEC+ had been hiking oil output gradually, as oil demand was recovering due to improving economic conditions. Most recently, the coalition decided to continue raising overall production by 400,000 barrels a day each month since August, and to raise its forecast for crude demand next year. This decision is in line with calls by the United States to boost supply, now that it is dealing with increasing gas prices in its domestic market.
As previously mentioned, the outlook for this market remains uncertain given the spread of the highly transmissible delta variant. Since the beginning of the week, 221,561,517 cases have been reported across the world, including 4,582,081 related deaths. So far, 5.46 billion COVID-19 vaccine doses have been distributed among the global population, with 2.17 billion people now fully vaccinated, accounting for 27.8% of the population.
By 7:47 GMT, West Texas Intermediate Crude Oil futures dropped by 1.10% to the 68.50 level, followed by Brent oil futures, which fell by 1.10% to the 71.84 level.