Oil Headed For 6% Weekly Drop As Analysts Worry About Further Covid Restrictions

One expert concedes that demand outlook is good in many parts of the world: File Image/Pixabay

With concern about the demand impact of the Covid Delta variant in overdrive, it's unclear why crude prices on Friday deviated from the recent norm and escalated, albeit minimally; however, the rise wasn't enough to detract from what appeared to be a weekly decline of around 6 percent.

Brent rose 27 cents to $66.72 per barrel, while West Texas Intermediate for September rose 35 cents to $64.04 per barrel at 0115 GMT (the more active October contract rose 33 cents to $63.83).

ANZ commodity analysts said in a note that with new lockdowns in regions with low vaccination rates such as across Asia and in countries like Australia, "This will lead to a fall in crude oil demand in the second half of the year; this is taking the shine off an otherwise positive backdrop elsewhere."

Stephen Innes, managing partner of SPI Asset Management, added, "Aviation remains the weakest component of global demand at the moment, and the risk of further restrictions on domestic and international travel due to the Delta variant will be a key variable for oil over the remainder of H2, particularly as the U.S. [summer] driving season ends."

Meanwhile, with so many eyes on the health of the world economy, the Taliban's takeover of oil-rich Afghanistan could shrink that troubled nation's economy by as much as 20 percent this year, experts warn.

Anwita Basu, head of Asia Country Risk at Fitch Solutions, said, "Countries facing similar circumstances like Myanmar and Syria have seen their GDPs collapse by around 10-20 percent, which can't be ruled out for Afghanistan too."

In other oil-related news on Friday, Royal Dutch Shell lost the right to operate an oil site venture in Nigeria after that country's courts ruled it wasn't entitled to renew a lease first granted in 1989.

Mele Kyari, managing director of the state-owned Nigerian National Petroleum Corp., said, "This is a huge victory for the government and people of Nigeria as we now have the impetus to responsibly unlock the oil and gas reserves the block offers for the benefit of all Nigerians."

Also, following a blockade staged by activists earlier this week, Equinor stated on Friday that crude oil loadings will resume at the Sture export terminal on Norway's west coast immediately.