Oil prices tumbled below $70 as traders grappled with the demand implications of COVID-19 Delta variant spreading globally, as some countries plan reintroduction of lockdown measures to curb the highly contagious new strain.
Brent crude, the international oil benchmark, rose to $68.74 a barrel at 09:33 am GMT on Tuesday after it fell to $68.58 per barrel on Monday (07:25 PM GMT) – the lowest level recorded since May 2021.
The decline follows the agreement reached by the Organization of the Petroleum Exporting Countries and allies (OPEC+) to increase oil production by 400,000 barrels per day starting from August 2021.
Although the OPEC+ deal is expected to see prices rise again to its pre-pandemic levels, the new strain would hit demand for oil.
Goldman Sachs, an investment bank in the US, said the OPEC+ deal to boost oil supply supports its view on oil prices and expects modest “upside” to its $80 per barrel summer Brent price forecast and a $5 upside to its $75 per barrel forecast in 2022.
However, it said oil prices are expected to gyrate in the coming weeks due to the risks from the new COVID-19 strain and the slower velocity of supply developments relative to recent mobility gains.
OPEC+ also agreed new output quotas for several members from May 2022, including the United Arab Emirates (UAE), Saudi Arabia, Russia, Kuwait and Iraq.
In a press conference on Monday, Abdulaziz bin Salman, Saudi energy minister, said Nigeria and Algeria could also see their baseline production revised.