Oil futures fell on Monday, falling slightly after exiting last week at their highest level since October 2018.
Concerns that the spread of a variant of COVID in Europe and Austria will result in less travel, lower fuel demand and put pressure on oil prices as traders waited this week for a decision by the Organization of Petroleum Exporting Countries and its allies on crude oil production levels.
The group of producers, known as OPEC +, will hold technical meetings on Tuesday and Wednesday to review the oil market before the official meetings of OPEC, as well as the broader OPEC + group, take place via videoconference on Thursday that should result in a decision on production .
Read: More “leeway” for OPEC + allows oil producers to think about increasing production without putting prices under pressure
S&P Global Platts Analytics sees an August quota increase of 500,000 barrels a day as the "most likely outcome" of the July 1st OPEC + meeting, Paul Sheldon, chief geopolitical advisor, political risk and oil supply analysis at S&P Global Platts, said in an e- Mail comment. "The Saudi caution in both global demand uncertainty and nuclear talks with Iran will likely prevent greater engagement until the next meeting in early August."
West Texas Intermediate Crude for delivery in August
On the New York Mercantile Exchange, it fell 86 cents, or 1.2%, to $ 73.19 a barrel.
September Brent crude
the most actively traded contract for the global crude oil benchmark on ICE Futures Europe was 89 cents, or 1.2%, at $ 74.49 a barrel. August Brent crude
which expires at the end of the trading session on Wednesday fell 91 cents, or 1.2%, to $ 75.27 a barrel.
For Brent in the mid-range of USD 70 / b, an increase in the quota by 500,000 barrels per day would "demonstrate sensitivity to the fragile recovery in demand," said Sheldon.
Platts Analytics expects the size of a quota increase to be "upward, even with the risk of non-compliance by about 1.8 million barrels" because OPEC "either needs to add additional volume for August or increase the quota by 1 million barrels," said he
In early April, OPEC + agreed to gradually reverse previous production cuts from May to July. Saudi Arabia also said it would ease the kingdom's voluntary cuts since February. At this point, OPEC + had withheld around 8 million barrels a day, of which 1 million represented the Saudis' voluntary cut.
Traders also watched COVID-19 cases with concern that the spread will affect demand for travel – and therefore fuel economy.
Oil prices took a hit "over the new setbacks the COVID-19 pandemic is causing in Europe, Southeast Asia and Australia," said Louise Dickson, oil market analyst at Rystad Energy, in a market update.
Australia struggled to contain several COVID-19 clusters across the country, with experts warning the country was facing the most dangerous days since the early stages of the pandemic.
"The forecast for the recovery in oil demand this summer may be a little overestimated, and traders face a reality check this week as the Delta variant hit Europe and a surge in infections in Southeast Asia and Australia brings the lockdown back," Dickson said.
"We could see a flurry of travel restrictions being reintroduced in Europe as a result of the proliferation of the Delta variant, which would weigh on demand for gasoline, diesel and kerosene, and prices are being made aware," she said.
In Monday trade, July gasoline
Lost 1.2% to $ 2.24 per gallon and July heating oil
lost 0.8% to $ 2.13 a gallon.
The July gas contract
expiring at the end of the day session rose 2.6% to nearly $ 3.59 per million UK thermal units. Prices reached their highest level since January 2019 on Friday, driven by expectations that high temperatures in the western US will boost demand for the fuel.