The price of crude oil unexpectedly stumbled on
Monday despite the evidence of tightening supply and rapidly falling
inventories. Both benchmarks, WTI and Brent fell by over 1.2 %.
As of 15:00 GMT on Monday, the price of WTI and
Brent were at $73.50 and $74.64 respectively.
The crude oil price had a particularly bumpy ride
last week: on Monday, the anticipated OPEC+ meeting did not take place; with
that the agreement to supply 400,000 bpd for the period from August to December
did not materialise.
The US crude oil inventories, meanwhile, fell by
over 8 million barrels for the week ending, July 2. The news of the substantial fall on Wednesday,
understandably, led to an increase in
oil price on Thursday and Friday.
Despite the encouraging news on the demand front,
the oil price fell on Monday, this week.
It looks like three factors are at play for the
unexpected development: first, the predicted growth of the main global
economies, according to the latest data, is far from strong; the growth of
China, the world’s second largest economy, meanwhile, is estimated to be much
lower than its impressive Q1 growth, according to Bloomberg analysts; the
emergence of Delta variant of the Coronavirus in more than 60 countries hardly
helped sustain the momentum of the markets that grew steadily over the last few
weeks.
In addition, the growing dissension between the UAE
and Saudi Arabia is becoming more than an unwanted distraction. Saudi Arabia,
however, says that it has already honoured the contractual demands for crude
oil from 5 buyers for August, while turning down the request to supply more,
perhaps not to upset its obligations to the OPEC+.
In these circumstances, an accelerated, global vaccine
drive appears to be the only workable catalyst to shore up the market
enthusiasm – in the short run.
