(Bloomberg) —Oil reversed earlier losses as sentiment improved in broader markets even though the spread of the delta coronavirus variant, including in the key market of China, continues to pose a risk to demand.West Texas Intermediate futures rose 0.9%, after slumping by the most in two weeks on Monday. Equities in Europe gained on Tuesday with positive earnings reports helping offset concerns over the virus.Covid-19 is forcing governments to reimpose or extend curbs, with residents in Beijing advised not the leave the capital as flights are being canceled. Some cities and townships have been sealed by local authorities.
Crude rallied strongly in the first half of the year as the rollout of vaccines allowed major economies to reopen, boosting oil demand and draining the glut built up during the initial wave of the pandemic. The pace of gains slowed in July as delta began to pose a greater challenge, while the Organization of Petroleum Exporting Countries pushed ahead with restoring more output.
“The sentiment in stock markets being positive today, commodity prices — including oil — also benefit,” said Hans van Cleef, senior energy economist at ABN Amro Bank. After Monday’s price drop, “the bulls see this as a buying momentum. But the fears of the delta variant affecting future oil demand continues to cap the upside.”
WTI for September delivery rose 62 cents to $71.88 a barrel as of 10:17 a.m. London time
Brent for October settlement gained 57 cents to $73.46 a barrel
In China, delta has breached some of the strictest virus defenses in the world. Authorities reported 61 confirmed cases and 23 asymptomatic infections on Tuesday. Thailand reported almost 19,000 infections, and in Indonesia, the biggest gasoline importer in Asia, restrictions have been extended in some regions until Aug. 9.
The rise in case worldwide could be taking a toll on oil consumption worldwide, slowing down a rebound from earlier this year.
“We are seeing probably a slight muting of demand globally, but I’m talking about a very slight muting of demand at this time,” BP Plc CEO Bernard Looney said.
BP Plc followed its Big Oil peers by increasing dividends and share buybacks as higher crude prices boosted profit.
The U.S., Israel and the U.K. all vowed to respond to a deadly drone attack on an Israeli-linked tanker last week in a major waterway for global oil shipments that they blamed on Iran.
The effort to revive Iran’s nuclear agreement and the prospect of sanctions relief on oil flows is growing more remote after the latest tanker attack, according to RBC Capital Markets.
First came output discipline, and now there’s cash. Pioneer Natural Resources Co. is the latest major U.S. shale driller to return more money to investors, accelerating a special dividend.
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