Oil Prices Decline as Coronavirus and Flood Threats Rise

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Oil prices fell nearly a dollar on Monday. Concerns about the increase in oil demand which are caused by the Delta variant, in addition to torrential rains in China, affect the predictions of oil shortage for the rest of the year. 

Brent crude futures for September fell 95 cents - or 1.3 percent - to $73.15 a barrel. Meanwhile, US Texas Intermediate crude reached $71.11 a barrel, down 96 cents. Earlier, the two decreased by over a dollar.

Corona virus infections continued to rise at the beginning of the week, with some countries recording record daily increases and extending public isolation measures that may slow down demand for oil.

China, the world's largest importer of crude oil, has also seen an increase in Coronavirus infections. This comes in while the country is facing severe floods and a typhoon in central and eastern parts of the country. 

Beijing’s crackdown on the misuse of import quotas, coupled with the impact of high crude prices, may lead to a decline in the growth of China’s oil imports. The growth could hit the lowest level in two decades in 2021, despite expectations of an increase in refining rates in the second half.

Investors are looking forward to the upcoming Federal Reserve meeting and United States Crude Oil Inventories data due later this week to determine the direction of prices.

Prices are receiving support from the strength of US demand and expectations of scarcity. This allowed the two benchmarks to recover from the 7% drop recorded last Monday, achieving the first gains in two to three weeks, last week.

Global oil markets are expected to remain in deficit despite the decision of the Organization of the Petroleum Exporting Countries (OPEC) and its allies to increase production for the rest of the year.

A few days ago, oil prices fell significantly after the sudden increase in US crude stocks, while trading was marked by a new growth in Coronavirus infections that may reduce the demand for fuel.