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Oil Prices Struggle to Scale of Wall of Demand Worry Amid Global Growth Scare

Commodities Aug 16, 2021 03:22PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com - Oil prices came under pressure Monday, unable to scale the wall of worry over the demand outlook at time when global growth appears to be slowing amid a renewed jump in Covid-19 infections.

On the New York Mercantile Exchange, U.S. crude futures fell $1.15 cents to settle at $67.29 a barrel, while on London's Intercontinental Exchange (NYSE:ICE), Brent fell 1.2% to trade at $69.72 a barrel.

China, the world's largest energy consumer, reported weaker-than-expected industrials and retail sales overnight Monday, stoking fears about the global recovery, and oil demand.

Growing doubts over the strength of demand were already front and center ahead of the data as the Delta variant of the coronavirus had triggered pandemic restrictions in China.

"In the short term, concerns about the spread of the Delta variant in China, and the effects this will have on oil demand, are continuing to weigh on prices," Commerzbank (DE:CBKG) said in a note. "These concerns were additionally fueled by data published overnight in China: industrial production turned out to be significantly softer than anticipated."

Some on Wall Street, however, continue to believe that oil prices will be supported as the outlook for global growth remains strong, and inventories will continue to decline.

Morgan Stanley (NYSE:MS) forecast Brent oil prices to be in the mid-to-high $70s for the rest of 2021, and still be supported well above $70 per barrel throughout 2022.

"That expectation is founded on our forecasts for strong global growth, a strong downward trend in global oil inventories, and an expectation that OPEC+ will continue to act to manage the oil market," it added.

Even as inventories are expected to decline, OPEC and its allies including Russia have faced calls from the White House to increase production even further to keep oil prices in check and support the global recovery.

In July, OPEC and its Russia-led oil-producing allies, OPEC+ struck an agreement to boost output by 400,000 barrels per day on a monthly basis starting August through the latter end of 2022 to restore the capacity they cut at the start of Covid-19 pandemic.

But major oil producing nations that are part of the production-cut accord aren't willing to heed those calls amid expectations that the planned production hikes will be enough to meet demand, Reuters reported Monday, citing unnamed sources.

Oil Prices Struggle to Scale of Wall of Demand Worry Amid Global Growth Scare
 

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Comments (2)
Franco Dominguez
Franco Dominguez Aug 16, 2021 9:01PM ET
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so geopolitical troubles made oil upside moves, no???. the supply will lack
soho electronics
soho electronics Aug 16, 2021 4:17PM ET
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ok so let me get this straight. oil weakens due to global concerns and weakness, yet the Dow constantly breaks records??
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Barani Krishnan
Barani Krishnan Aug 16, 2021 4:17PM ET
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emad hijazi  $63 and $64
Louis Lipps
Louis Lipps Aug 16, 2021 4:17PM ET
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Barani Krishnan  Not with OPEC telling B to go F himself if regards to increasing production it isn't.  If it does it'll be very short lived.  I can see WTI going back to $65.  Brent to 64 is a stretch.  Not with where inventories currently are.
Louis Lipps
Louis Lipps Aug 16, 2021 4:17PM ET
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Now in a perfect world oil should be $50-55 but this world isn't perfect.  Not even close.  Then again, you're a perma bear and perma bears will do as perma bears do, Barani
Barani Krishnan
Barani Krishnan Aug 16, 2021 4:17PM ET
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Louis Lipps  To each his own, Louis. Don't school us on biases when you can't correct your own. Audie :)
Franco Dominguez
Franco Dominguez Aug 16, 2021 4:17PM ET
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50-55 really where do attend school when your economy is "RECOVERINg" oil is the most important asset, supply chain, cars, production, etc
 
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