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U.S. oil drops 5% to beneath $ 70 on OPEC’s manufacturing spurt and Covid fears

Oil pipelines, pumping platforms, and electrical transmission lines dot the landscape along California’s Petroleum Highway (Highway 33), which runs along the northwest side of the San Joaquin Valley.

George Rose | Getty Images News | Getty Images

West Texas Intermediate crude oil futures fell below the all-important $ 70 mark for the first time in more than a month on Monday as OPEC and its allies agreed to ramp up production and the Delta-Covid variant global Demand threatened.

US oil fell more than 6%, hitting session lows of $ 67.21 for the biggest daily decline since March. The contract is now nearly 12% below its most recent high of $ 76.98 on July 6, the highest level in more than six years. The international benchmark Brent crude fell 5.4% to $ 69.63 a barrel.

The group of 23 nations known as OPEC + agreed on Sunday to increase production by 400,000 barrels each month starting in August. The production increase will last until September 2022, when all of the nearly 6 million barrels per day that the company is still holding back will be back on the market.

The announcement came after the group’s first meeting on July 1 broke up due to a disagreement between Saudi Arabia and the United Arab Emirates over the latter’s base production quota.

“We see [Sunday’s] Deal as supportive of our constructive view of the oil price, as supply is increasingly becoming the source of the upward momentum and indications of supply shortages outside of OPEC are likely in the coming months, “Goldman Sachs said in a statement to its customer producers as the bottom for the oil price. although the delta variant could lead to price fluctuations in the coming weeks.

The July meeting of OPEC +, which ended without an agreement, upset the oil market as it opened the door to a possible breakup of the group, with each nation following an independent production policy.

“This was a renewal of the OPEC + vows,” said RBC’s Helima Croft on Monday in CNBC’s Worldwide Exchange. “We believe the market can absolutely absorb the extra 400,000 barrels a month … this is a constructive deal.”

Energy stocks fell after the oil price fell. The group lost 4.5%, making it the worst performing sector in the S&P 500. Occidental, Diamondback Energy, Schlumberger and Marathon Oil were among the largest declines, each with more than 6%.

Despite Monday’s downturn, some Wall Street firms believe a tight market will continue to support prices. Credit Suisse raised its forecast on Sunday evening and now expects an average Brent price of $ 70 per barrel in 2021, up from an earlier estimate of $ 66.50. The company raised its WTI forecast for the year to $ 67, down from $ 62.

Citi expects Brent and WTI to rise to $ 85 or more this year. “The summer season for the oil markets should be stronger than usual this year due to the pent-up demand for leisure time,” the company said in a statement to customers.

“With oil demand growth outpacing supply growth in the short term, we continue to expect a tight summer that should boost oil prices,” added UBS. The company expects Brent to climb to $ 80 before dropping to $ 75 by the end of the year.

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