Oil Drops One Dollar a Barrel Due to Corona And Torrential Rains

Oil prices fell nearly a dollar on Monday as concerns about demand caused by the spread of mutated strains of the Coronavirus, as well as torrential rains in China, dispelled expectations of tight supplies for the rest of the year.

Brent crude futures for September delivery fell 95 cents, or 1.3%, to $73.15 a barrel in Asian trading, while US West Texas Intermediate crude reached $71.11 a barrel, down 96 cents. Earlier, the two contracts went down more than a dollar.

Coronavirus cases continued to rise at the beginning of this week, while some countries recorded record daily increases and extended public isolation measures that may slow down demand for oil. China, the world’s largest importer of crude, has also seen an increase in COVID-19 cases as the country faces severe floods and a typhoon in the central and eastern parts of the country.

A campaign launched by Beijing against the misuse of import quotas, accompanied by the impact of high crude prices, may lead to a decline in the growth of China’s oil imports to 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 US crude 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 tight supplies, which allowed the two benchmarks to recover from the 7% drop recorded last Monday, to achieve 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.