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Oil Should Resume Upward
Trend Despite Delta Spread

Brent crude has declined below USD 70 a barrel, amid worries that the spread of the delta variant could lower demand for transport fuels.

China closed tourist sites, canceled fights, and limited train travel, while the US states of Florida and Louisiana registered some of their highest hospitalization numbers since the pandemic started. But despite setbacks, we believe the return to economic normalization will continue, lending support to oil prices, notes Mark Haefele, Chief Investment Officer, UBS Global Wealth Management.

In the UK, where close to 60% of the population are fully vaccinated, the weekly count of new cases is on track to decrease for a third straight week, boding well for other markets that are pushing ahead with their vaccination programs.

Political appetite for wider lockdowns is limited, while more countries and companies are adding pressure on citizens to get vaccinated. New York City will require proof of vaccination at restaurants and gyms from 13 September.

Against this backdrop the oil market remains in deficit, despite the recent rise in US inventories. We continue to expect global oil demand to exceed 99mbpd this year as the economic recovery continues, up from a low of 78mbpd in April 2020, Haefele said.

Oil remains most preferred in our global tactical asset allocation. We also like energy stocks and oil-linked currencies, Haefele added.

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