Oil is often affected by countries and the decisions they make, most commonly it is countries in the Middle East such as Saudi Arabia who control OPEC+. Last month we saw this firsthand when in early June, oil reached a six-year all-time high after OPEC and its allies voted to pass an output policy for the remainder of the year regarding the amount of oil entering the market. This week and more specifically in the past few days, oil prices have dropped around 4% in reaction to China as well as OPEC. This comes as in July it was reported there was the first contraction of factory activity in China for the first time in over a year. This overlaps with OPECs decision to increase production of oil – essentially meaning an increase in supply and decrease in demand – the perfect spell for a price drop.
The trend is just limited to China though, in fact, according to data from the Institute for Supply Management (ISM) the pace of domestic growth in the U.S slowed in the last two months – with the ISM’s index of national factory activity falling to 59.5 last month, the lowest reading since January. One of the variables behind this is the Delta variant of COVID which President Joe Biden’s chief medical adviser Anthony Fauci commented on stating that The United States will not lock down again to curb COVID-19, but “things are going to get worse” as the Delta variant fuels a surge in cases, primarily among the unvaccinated. What do you think of the dip in oil prices, and do you think you’ll be making a play in either direction with the commodity?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.