By Peter Nurse
Investing.com -- Crude oil prices slumped Monday, weighed by concerns over mounting Covid-19 cases as well as OPEC+ members patching up their differences and agreeing to additional global supply.
By 9:35 AM ET (1335 GMT), U.S. crude futures traded 3.7% lower at $68.94 a barrel, falling below $70 for the first time in over a month, while the Brent contract fell 3.3% to $71.13.
U.S. Gasoline RBOB Futures were down 2.9% at $2.1872 a gallon.
Covid-19 cases are soaring in Asia, with infections hitting an 11-month high over the weekend in Singapore, Thailand had its highest single-day increase since the pandemic began, while Australia’s major cities are now on lockdown.
However, infections are also growing in the high energy-consuming regions in Europe and America, even with England removing all restrictions Monday. U.S. cases were up 70% last week over the previous week, with outbreaks occurring mainly in parts of the country with low vaccination rates.
Also weighing on the market was the news over the weekend that Saudi Arabia and the United Arab Emirates had settled their differences over output policy, allowing the Organization of the Petroleum Exporting Countries and its allies to come to an agreement to add extra supply to the global market.
Under the proposal, the group, known as OPEC+, will increase oil supply by around 400,000 barrels a day per month starting in August until all of the output that it cut in response to a collapse in global demand at the start of the pandemic is restored.
However, despite today’s oil price losses, the supply increase of 400,000 barrels a day will turn out to be a pittance, according to Ed Morse, global head of commodities research at Citi, adding that demand is significantly higher, despite the Covid-19 pandemic exploding in parts of the world, and oil prices are likely to climb much further by the time summer is over.
Goldman Sachs (NYSE:GS) agrees, expecting modest "upside" to its summer forecast for Brent to reach $80 a barrel following the deal, while ING keeps its Brent forecast at $75 a barrel over the third quarter of 2021.
“Healthy demand growth combined with moderate supply increases from OPEC+ will likely remain supportive for the oil market in the short term at least,” ING added.
Traders also seem to expect further price gains judging from the latest positioning data, as speculators increased their net long position in ICE (NYSE:ICE) Brent by 9,022 lots over the last week and in Nymex WTI by 7,621 lots.