The price of crude oil weakened on Friday, pressured by news of growing supplies and concerns that the wildfire spread of the Covid-19 Delta variant is cutting into demand for oil as economic growth stalls.

Fundamental analysis: Baker Hughes reported that the U.S. oil rig count increased by ten this week

Energy services firm Baker Hughes reported that the U.S. oil rig count increased by ten this week, the count ended at 397 on Friday, and it is important to mention that a year earlier, the U.S. had 172 rigs in operation. Across North America, oil and gas rigs increased by 17 to 664, while in Canada, the count was up by eight to 164, up from 54 at the same point last year.

On the other side, the International Energy Agency (IEA) warned that the fast-spreading Delta variant of the coronavirus is cutting into demand for oil as economic growth stalls. The IEA reported that oil demand began falling in July, dropping by 120,000 barrels per day and that the market could become oversupplied in the upcoming quarters, which represents a threat for crude oil prices.

“OPEC+ has no scope whatsoever to further increase its oil production next year if it doesn’t want to risk another oversupply and inventory build. According to the IEA, oil stocks in industrialized countries in June were 66 million barrels below the pre-pandemic five-year average,” said Commerzbank analyst Carsten Fritsch.

The battle against the coronavirus is still not over, and the IEA’s pessimism comes as Covid-19 continues to spread in the United States and Asia. The situation in Japan is serious, and the country reported on Thursday more than 18,000 new cases, which is its highest number of new cases after a prior daily record of 15,812.

The International Energy Agency has downgraded growth for the second half of 2021; still, OPEC left its demand forecast for 2021 unchanged at 96.6 million bpd, with a further 3.3 million bpd rise in 2022.

Technical analysis: Crude oil price continues to trade below $70

Those interested in investing in commodities like oil should consider that the risk of further decline is probably not over.

Data source: tradingview.com

Crude oil continues to trade below $70 resistance, and if the price falls below $65 support, it would be a firm “sell” signal, and the next target could be around $60. The Delta variant of the coronavirus continues to pose downside risks together with further new variants, but if the price jumps above $70 resistance, the next target could be around $72.

Summary

Energy services firm Baker Hughes reported that the U.S. oil rig count increased by ten this week while the International Energy Agency warned that the fast-spreading Delta variant of the coronavirus is cutting into demand for oil as economic growth stalls. Crude oil remains under pressure, and if the price falls below $65 support, the next target could be around $60

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