The oil market is happy with the OPEC+ decision to gradually lift production further starting next month, but the sharp price move lower on Monday certainly didn’t show it.
“Declining demand growth could deflate the rally,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch, as the OPEC+ agreement has come “just as the Delta variant is spreading, and leading to concerns with the implications for global demand growth.
It’s difficult to anticipate future demand growth from here, said Arnim Holzer, macro and correlation defense strategist with EAB Investment Group, but we “see the U.S. reopening strength as likely to still outstrip supply.” The potential for “new widespread social [and] travel restrictions, reducing demand for oil,” are only partly to blame for the losses in oil prices, said Jeff Klearman, portfolio manager at GraniteShares, which offers exposure to oil through the GraniteShares Bloomberg Commodity Strategy No K-1 exchange-traded fund COMB, -2.38%.
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