Crude slumped on Monday in tandem with broader financial markets on fears that the spread of the coronavirus’ delta variant would inflict a fresh blow on the global economy. The variant has ripped through Asia, prompting a flurry of renewed curbs by governments to check its spread. The price plunge came just after a weekend meeting of OPEC+, at which the 23-nation alliance led by Saudi Arabia and Russia finalized plans to restore halted production.
Since then, the market has been on the mend as traders anticipate that OPEC+’s scheduled output increases aren’t large enough to avert a shortfall in coming months. Sentiment has been boosted as U.S. government data showed oil inventories at the nation’s key storage hub in Cushing, Oklahoma, falling to the lowest since January 2020.
“Market players shook off some of their worries that the pandemic will hit oil demand and put their faith in tightening oil fundamentals,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Although there was an unexpected build in overall U.S. crude stockpiles, distillates and gasoline supplies declined, the Energy Information Administration reported on Wednesday. Data from around the world now show gasoline consumption within 4% either side of 2019 levels in the U.S., India, Spain and Portugal, while demand is down 6% in the U.K.
China’s Strategic Petroleum Reserve supplied about 3 million tons, or 22 million barrels, to processors earlier this month, according to people familiar with the situation. The move was intended to cool prices, the people said. The operation might weaken Chinese demand for imported crude.