Delta Variant Fear Triggers Over 7% Plunge in Oil Prices Within a Day... Breaks Below $70 (Comprehensive)

US CDC Reports Recent Weekly Average Cases at 30,000 Range
OPEC+ Agrees to Ease Production Cuts Amid Demand Slowdown Concerns, Causing Sharp Drop
Suppressed Travel Demand Remains Strong... "Will Reach $80 Level Within the Year"

[Image source=Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] International oil prices plunged more than 7% due to concerns over decreased demand amid the spread of the COVID-19 Delta variant. This is interpreted as a shake in confidence in the economic recovery, which had been driving the rise in oil prices amid already heightened instability from the recent short-term surge. However, some predict that suppressed travel demand will not easily decline, and oil prices will continue to rise until the end of the year.

On the 19th (local time) at the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil closed at $66.42 per barrel, down 7.51% from the previous session. This is the first time in about a month since June 9 that WTI fell below the $70 mark. The recorded drop was the largest in over 10 months since September 8 of last year.

Brent crude from the London ICE Futures Exchange also fell 6.75% from the previous day to $68.82 per barrel. This is the lowest level since May 24 and the largest daily drop since March.

International oil prices plummeted on the day as fear grew over the spread of the COVID-19 Delta variant. According to CNN, the U.S. Centers for Disease Control and Prevention (CDC) announced that the average number of new COVID-19 cases in the U.S. over the past week has risen back to around 30,000 per day. Consequently, airline stocks such as United Airlines, Delta Air Lines, and American Airlines, which had been strong due to a surge in holiday travel in the U.S., all sharply declined, delivering a direct blow to international oil prices.

News from the previous day's OPEC+ (Organization of the Petroleum Exporting Countries (OPEC) member countries and non-OPEC allies) meeting, where an agreement was reached to ease production cuts, also influenced the downward trend. The resolution of disputes between Saudi Arabia and the United Arab Emirates (UAE), which had been a source of market instability, led OPEC+ oil-producing countries to announce that starting next month, they will ease production cuts by an additional 400,000 barrels per day each month, raising expectations for increased supply.

However, some forecasts suggest that due to the still significant suppressed travel demand, international oil prices in the second half of the year will rise to the $80 level within the year. According to CNBC, international investment bank UBS stated in an investment report on the day, "The impact of the COVID-19 Delta variant is expected to be limited, and in the short term, oil demand will continue to outpace supply," adding, "The price increase will continue, with international oil prices rising to the $80 level by the end of the year and remaining around $75 thereafter."

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