Oil was on the rise in July, and the price recovered to pre-pandemic levels, US WTI reaching $77 a barrel, in addition, US crude inventories were down as demand increased. The post lockdowns and vaccination rollouts accelerated the demand for oil as businesses reopened.
However, the highly contagious SARS-CoV-2 Delta, identified in India rapidly spread to over 100 countries, threatens the oil demand. Delta is spreading fast in the USA and China, the two largest oil consumers.
Fears of the virus spreading caused the Brent crude price to drop by 0.66% to $72.41 a barrel on Wednesday. US WTI crude was down 0.98% to $70.56 a barrel.
The outbreak in China affected Beijing, Chongqing and five other provinces, and in Wuhan, all 12 million residents are to be tested. The infections are spreading further due to the summer travel season in China. Chinese authorities have imposed strict controls to curb the spread of the virus.
US-Iranian tensions impacting oil prices
Sanctions imposed by the USA in 2015 on Tehran has increased the tensions between the two nations. The USA has blamed Iran for the drone attack on an oil tanker in June. Another recent attack in July killed two sailors on board, and at the time of writing, another ship was victim to a potential hijacking. The Gulf attack in June caused oil prices to surge by 2.2%, as supply worries increased.
Tensions between the West and Iran are rising as the US and other leading nations trying to reach a new deal with Iran over their nuclear program.
DHT Holdings, the owner of the attacked tanker, has suspended bookings to the Middle East. Moreover, insurance companies could stop covering ships for voyages through this region.
The recent attacks have not affected the oil prices but concerns of supply constraints could have a lagging effect.
The global demand is still grim as Delta spreads and Middle East threats can constrain the supply. However, US oil inventories data is due later today which could support the price.