Covid Fears Cause Biggest Weekly Crude Decline Since March

Investors are also impatient to see Saudi, UAE deal formalized: File Image/Pixabay

Two key crude benchmarks eked out minuscule gains on Friday but not enough to prevent the third consecutive week of declines for Brent and the biggest weekly decline for West Texas Intermediate since March.

With investors spooked by the rise of Covid cases in Los Angeles County and Britain, Brent on Friday rose 12 cents, or 0.2 percent, to settle at $73.59 per barrel, while WTI rose 16 cents, or 0.2 percent, to settle at $71.81.

Earlier in the volatile session, both benchmarks were down over $1 a barrel, and despite the small gains Brent fell almost 3 percent for the week (WTI fell almost 4 percent this week).

Also dragging on the market was Saudi Arabia and the United Arab Emirates waiting to finalize a deal to increase production, after having reached a compromise earlier this week in the wake of the failed Organization of the Petroleum Exporting Countries (OPEC) output talks.

Bob Yawger, director of energy futures at Mizuho, explained investor concerns by stating, "The longer it takes for OPEC+ to announce an extraordinary meeting to vote on the extra barrels, the more it implies other OPEC+ members may also want increases to their baseline quota."

John Kemp, commodities analyst for Reuters, noted on Friday that the current mix of flat prices and spreads "is consistent with the view OPEC+ will increase production significantly in the remainder of 2021 and early 2022 to satisfy increasing demand while keeping stocks relatively low."

As for current crude prices, Kemp mused that in the short term, "A range of $70 +/- $5 is the one likely to minimize friction between producers and consumers, keeping petroleum competitive as a source of energy while ensuring sufficient revenues for investment."

Countering traders' fears on Friday were ongoing reports that an overall recovery from the pandemic continues: U.S. retail sales unexpectedly increased last month as demand for goods remained strong; spending patterns also indicated a shifts back to services, contributing to expectations that economic growth accelerated in the second quarter.

Also on Friday, another win for the green movement was achieved when Greenland's new socialist-led government announced it was dropping all plans for future oil exploration "For the sake of our nature, for the sake of our fisheries, for the sake of our tourism industry, and to focus our business on sustainable potentials."

However, the move cuts off potential investments that could have aided Greenland's efforts to gain economic independence from Denmark.