Oil prices fall $1 as economic worries offset tightening supplies
In response to higher oil prices, US energy firms added oil and natural gas rigs for a second week in a row. PHOTO: REUTERS
Oil prices slipped on Monday as concerns over slowing global growth outweighed the prospect of tightening supply after talks among key producers to raise output in coming months stalled.
Brent crude for September fell $1.13, or 1.5%, to $74.42 a barrel by 1111 GMT while US West Texas Intermediate crude for August was at $73.39 a barrel, down $1.17, or 1.6%.
Both benchmarks fell around 1% last week but are still not far off highs last reached in October 2018.
The spread of coronavirus variants and unequal access to vaccines threaten the global economic recovery, finance chiefs of the G20 large economies warned on Saturday.
"Traders are now refocusing on the spread of the Covid-19 pandemic and global concerns over the new variants’ expansion are weighing on prices, despite tightening oil supplies globally," Rystad Energy analyst Louise Dickson said.
The Organisation of the Petroleum Exporting Countries and their allies, a group known as OPEC+, abandoned talks last week over an output deal, which included pumping more oil from August, after a dispute between Saudi Arabia and the United Arab Emirates about how to extend the pact.
Although failure to agree means less oil in the short term, analysts say the collapse of talks raises the longer term prospect of producers abandoning the deal and pumping at will.
"The market has been a bit negative as of late amid the growing sense that the latest OPEC+ impasse could be a precursor to a pump-and-grab scenario, meaning a lot more oil potentially gets put on the market," said Stephen Brennock of oil broker PVM.
Saudi Arabia and Oman called on Monday for continued cooperation between OPEC and allied producers.
Front-month WTI crude futures posted their sixth weekly gain last week after a bullish report from the US Energy Information Administration showed US crude and gasoline stocks fell while gasoline demand reached its highest since 2019.
In response to higher oil prices, US energy firms added oil and natural gas rigs for a second week in a row, data from Baker Hughes showed.