The increase in oil production was seen as a balancing act to prevent a further surge in oil prices that could potentially hamper the global economic recovery.
However, despite this decision, oil prices have faced downward pressure throughout the week. Several factors have contributed to this decline, including concerns over the rapid spread of the Delta variant of COVID-19 and its potential impact on global oil demand. With new cases rising in many countries, there are growing concerns about the possibility of renewed lockdown measures, which could dampen oil consumption.
Additionally, worries over the continued surge in new COVID-19 cases in major oil-consuming countries like India and the United States have added to the bearish sentiment in the market. The uncertainty surrounding the timeline and effectiveness of vaccine distribution has only added to the market's apprehension.
Furthermore, the recent deal struck between Iran and the International Atomic Energy Agency (IAEA) has raised concerns about the potential return of Iranian oil to the global market. If the United States and Iran reach an agreement on reviving the nuclear deal, it could lead to the lifting of sanctions on Iranian oil exports, resulting in increased supply and further downward pressure on prices.
Another factor contributing to the weekly loss is the strengthening of the US dollar. The dollar has been performing well against major currencies, making oil more expensive for buyers holding other currencies. This has led to a decrease in demand and a subsequent decline in oil prices.
Overall, while the OPEC+ decision to increase oil production was aimed at stabilizing the market, several external factors have hindered its impact. The ongoing threat of the Delta variant, the potential return of Iranian oil, and a strong US dollar have all played their part in suppressing oil prices.
It is important to note that despite the current weekly loss, the long-term outlook for the oil market remains uncertain. As countries strive to recover from the pandemic and economies gradually reopen, oil demand is expected to pick up. However, the path to full recovery may still be uncertain, with the possibility of further setbacks along the way.
Investors and market analysts will closely monitor the developments in the coming weeks to gauge the impact of these factors on oil prices. The actions taken by OPEC+ and other key players in the oil market will play a crucial role in determining the direction of oil prices and the overall stability of the global oil market.
