FX.co ★ Oil quotes plummeted after 7-month highs

On Wednesday morning, the leading oil brands' prices drop after a two-day rally.

On Wednesday, the price for Brent crude oil futures with delivery in November lost 0.62% and showed $69.97 a barrel. The cost of October Brent contracts dropped by 0.56% to $70.65 a barrel. The day before these futures rose by 3.4% to $71.05 a barrel.

At the same time WTI crude oil contracts with delivery in October fell by 0.56% to $67.16 a barrel. The previous day the cost of these contracts jumped by 2.9% to $67.54 a barrel.

During two previous sessions, the Brent crude oil gained 9% (above $70 a barrel) outperforming WTI which jumped 8.7%. Both reached their highs from January of this year.

At the beginning of the week, the spread of the coronavirus eased and hopes for increased demand caused a spectacular rise in the oil market. China, the world's largest oil importer, reported no new confirmed delta variant cases on Monday.

The oil price gains came after a blaze, which broke out on the offshore platform operated by Pemex in the Gulf of Mexico. The accident paralyzed about 25 percent of Mexico's daily production capacity.

Another upward factor for oil was the data on crude stocks in the US from the American Petroleum Institute. The data showed a decline in the oil reserves by 1.62 million for the week. Analysts had predicted a drop of 2.37 million barrels.

Thus, the two-day rise in the oil market was swift and sharp. Nevertheless, the preceding correction had been one of the most striking in 2021. Such a roller coaster ride in the oil market certainly points to the strong influence of the delta strain on global oil prices. On Wednesday evening the US Department of Energy will release official statistics on the US oil reserves within the country. Analysts expect the Department of Energy to report a 2.4 million-barrel drop.

On Wednesday, the spread of COVID-19 once again became the hot topic among investors in the oil market despite the Chinese authorities successfully implemented the measures of the delta strain containment. The coronavirus continues to pose a serious threat to many nations around the world and to global oil demand.

In Australia, the number of new COVID-19 cases reached another daily record of 919. Thailand reported 10.000 deaths caused by the new coronavirus. Recently, Japan announced that they intend to expand the state of emergency covering eight more prefectures.

The rally in the oil market, which frightens the investors, is supported by the rapid change in the currency and stock markets before the Jackson Hole Symposium. In anticipation of Jerome Powell's speech, safe-haven currencies were declining while risky assets were rising.

The Sunday speech of Robert Kaplan, President and CEO of the Dallas Fed, also had a serious impact on the markets. He said that due to the rapid delta variant spread, the Fed may announce the gradual QE tapering.

Market analysts expect that in a short-term perspective the price for Brent crude oil will rise to $75–$80 a barrel amid a structural deficit in the market. Besides, experts doubt the return of Iranian oil on the global market in 2021. They also noted the possibility of further reductions in oil reserves around the world.

Oil market participants are waiting for news on the future level of oil production from the members of the OPEC+ alliance. The next meeting of the international organization is scheduled for September 1.