The prices of oil rose on July 21, 2021, extending gains from the previous session as a growing risk appetite offered support despite data indicating that there is an unexpected surge in United States oil inventories in the past week and a weaker demand outlook as a result of increasing COVID-19 infections.
Brent crude futures gained around 84 cents, translating to around 1.2%, trading at $70.19 a barrel at 0840 GMT. It had dropped to a session low of $68.63 per barrel. On the other hand, U.S. West Texas Intermediate (WTI) crude futures gained 84 cents, or around 1.3%, to trade at $68.04 per barrel, after plunging to $66.44 per barrel earlier on Wednesday.
Ricardo Evangelista, ActivTrades analyst said:
“Oil … is appearing to have found support as risk appetite increases once again. This support comes after the pronounced falls registered during the last few sessions, which were triggered by apprehension over the impact the Delta variant …, as well as the agreement between OPEC+ countries to increase production.”
Oil prices plunged on July 19 after a deal by the Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, to increase supply by 400,000 barrels per day every month from August up to December.
This sell-off came due to fears that a surge in cases of the Delta variant of the COVID-19 in major markets like the United Kingdom, the United States, and Japan will affect demand. A possible increase in US inventories weighed significantly on the prices earlier in the session.
The US crude stocks surged by 806,000 barrels for the week ending July 16, based on two market sources cited by American Petroleum Institute figures. Various analysts polled by Reuters were expecting a big fall in inventories. Official US Energy Information Administration data is due later on July 21.
JPMorgan analysts stated that global demand is expected to average around 99.6 million barrels per day in August, up by 5.4 million barrels per day from April. But they also mentioned:
“We only see 4Q21 demand recovering another incremental 330,000 vs a normalized 2019 baseline as colder weather sets in for the northern hemisphere and peak travel season is behind us.”
Will oil continue rising or will the spread of the new coronavirus variant push it back down as governments resume restrictive measures?
