Oil prices continued to decline during the opening session on Monday as a stronger US dollar and a rise in Covid-19 cases exerted downward pressure on the commodity.
Brent, the international benchmark, was down 3.6 per cent to trade at $68.15 a barrel at 12.47pm UAE time. West Texas Intermediate, which tracks US crude grades, was down 3.8 per cent at $65.63 a barrel.
The benchmarks fell by about 8 per cent last week amid concerns that the more virulent Delta variant, which is responsible for an increase in infections in several parts of the world, could derail crude demand.
More than 203 million people worldwide had been infected by Covid-19 as of Monday, according to Worldometer, which tracks the pandemic.
Deaths from coronavirus have surged past 4.3 million, with major oil demand centres such as the US, India, Brazil and Russia registering the highest number of cases.
"What is disturbing oil markets the most, though, is the Delta Covid-19 strain, which has vast [areas] of the planet in its grip," said Jeffrey Halley, a senior market analyst for the Asia-Pacific region at Oanda.
"That is increasing fears that the global recovery will stutter and become very uneven, thus reducing oil consumption even as Opec+ continues to increase production."
Opec+, the group headed by Saudi Arabia and Russia, is bringing 400,000 barrels per day of supply back to markets in August.
The group is looking to phase out a 5.4 million bpd supply restriction pact on the basis of growing demand for crude amid signs of global economic growth.
"While the increments are relatively small – at just 400,000 bpd per month – and won’t be enough to overwhelm markets at least until the end of 2021, they nevertheless represent a consistent flow of additional supply at a time when the market may not be able to absorb it," Edward Bell, senior director of market economics at Dubai-based Emirates NBD, said in a note on Monday.
However, commodity prices have also retreated over the past couple of days amid a resurgent US dollar.
Gold fell by 2.3 per cent on Friday, taking prices for the metal down to $1,763 a troy ounce. Industrial metals also collapsed as the US dollar gained strength.
The value of commodities is inversely related to the US dollar – the stronger the dollar, the weaker the commodity prices and vice versa.
Saudi Aramco's stock price is also going to remain a focus for investors and traders after its net profit for the second quarter nearly quadrupled, Naeem Aslam, chief market analyst at AvaTrade, said.
The world's largest oil-exporting company reported that net profit had increased to $25.45 billion, from $6.56bn, due to higher crude prices, improved refining and chemicals margins and better prospects for global economic recovery.