Price Performance Indicator
The COFR crude oil contract closed last week with a weekly appreciation of 2.90% to Rp 1,059,100 per barrel. The catalyst can be traced to the continued combination of expectations of a demand recovery joined by a number of sensitive geopolitical headlines in the Middle East.
In terms of demand level optimism, oil absorbs the projections of several companies which mention an increase in travel activity during the summer holidays. According to data from the US Transportation Security Administration, nearly 50 million airport passengers were registered in May, up 19% from April. So far nearly 35 million air passengers have been registered as of June. Nevertheless, American Airlines on Sunday announced it would cancel about 1% of flights in July due to labor shortages at some of its hubs amid soaring demand triggered by rising US Covid-19 vaccination rates and travel restrictions being lifted in recent weeks.
From geopolitics, Iranian President Ebrahim Raisi last week expressed support for talks with a number of countries to revive the 2015 nuclear deal, although until the weekend, the results of the negotiations could not be presented to the market. At the same time, Raisi also firmly rejected a meeting with US President Joe Biden, even if the US removed all sanctions against Iran. This further strengthens speculation that US sanctions, especially on Iran's oil sector, will still be applied, which at the same time dampens concerns about additional global oil supplies from Iran in the near future.
However, now the price’s rally must go back into the consolidation phase amid the reversal of the COVID atmosphere in several regions, ahead of the minutes of the OPEC+ meeting this week.
OPEC+ meeting in the spotlight
The focus of the oil market is on the OPEC+ meeting scheduled for Thursday, where citing a survey conducted by Bloomberg it is estimated that OPEC and its allies could potentially decide to increase production in August by 550,000 bpd or almost a quarter of the global deficit OPEC+ anticipates for a month. Previously, signals of increasing production have been shown in the OPEC projection report that forecasts an oil supply deficit in August and in the rest of 2021 as the economy recovers from the pandemic, indicating OPEC+ has room to increase production.
Pessimistic Reverse Demand Projection
Increasingly weighing on the demand side, the Delta variant is triggering new travel restrictions worldwide. After a spike in new infections in Asia last week, the outbreak of the Delta variant of Covid-19 in Europe prompted Portugal, Spain and Germany on Monday to issue new travel restrictions on unvaccinated Britons. Moscow and St. Petersburg on Monday reported the highest number of deaths from Covid-19, and the Delta variant represents about 90% of all new cases. This in result, COVID-19 spreads to all types of economic sectors, such as employment and on the manufacturing side.
CN – Manufacturing PMI
EIA - Crude Oil Inventories
All – OPEC-JMMC Meetings
US – ISM Manufacturing PMI
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