Oil holds near eight-week low after selloff on delta concern

Brent oil steadied after a coronavirus-driven washout on Monday that saw prices tumble to an eight-week low.

Futures in London held near $69 a barrel after plunging 6.8 per cent on Monday amid a broader market rout. The fast-spreading delta variant of COVID-19 has led to a surge in virus cases and renewed restrictions as it sweeps across the globe from Asia to Europe.

Oil’s upward trajectory has reversed in July, with the latest virus waves demonstrating the uneven nature of the economic recovery. Goldman Sachs Group Inc. said the delta variant may curb global oil demand by 1 million barrels a day for a couple of months, though that’s offset by a slow production ramp-up from OPEC+.

“As things stand, it is hard to see prices staging a comeback unless virus jitters are brought back under control,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates.

Prices

  • Brent for September settlement edged up 0.6 per cent to $69.05 a barrel as of 10:20 a.m. in London, after closing at the lowest level since May 24 on Monday – below its 100-day moving average for the first time since November.
  • West Texas Intermediate for August, which expires Tuesday, rose 0.5  per cent to $66.75 a barrel
  • The more-active September contract added 0.6 per cent to trade at $66.76

Signs of delta’s continued impact on energy abound. The U.S. has warned citizens to not travel to the U.K. and Indonesia amid an increase in infections there. Southeast Asia’s largest economy has surpassed India in new daily cases, becoming the continent’s new virus epicenter, while several of its neighbors are also seeing a surge in infections.

Nevertheless, there are expectations that the oil market will tighten and prices will once again rally. OPEC+ has agreed to keep gradually reviving output shuttered during the pandemic, but market watchers warn the increases aren’t enough to fill the looming supply shortfall.

© 2021 Bloomberg L.P.

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