Futures in New York traded near $69 a barrel after rising more than 4% over the previous two sessions. The International Energy Agency cut its global consumption forecasts “sharply” for the rest of this year and predicted a new surplus in 2022. Yet Goldman Sachs Group Inc. estimated the net impact of the delta virus variant on oil demand is likely to be moderate.
The rebound in key economies such as the U.S. and Europe has helped to drain bloated stockpiles built up during the pandemic and driven prices higher, but the latest wave is an indication that the recovery will be bumpy. Steps to rein in the Covid-19 resurgence, particularly in China, are clouding the outlook.
“The demand outlook is highly uncertain because of the delta variant,” Toril Bosoni, head of the IEA’s oil industry and markets division, said in a Bloomberg television interview. “There could be further downside risk due to the virus in the second half,” but “there’s also upside risk” from pent-up travel demand in the U.S. and Europe.
President Joe Biden, meanwhile, urged OPEC to boost supply more quickly to make gasoline more affordable for Americans. Crude prices dropped after the comments on Wednesday but reversed losses before the end of the session. OPEC+ has agreed to hike production by 400,000 barrels a day each month from August until all of the output halted during the pandemic is revived.
U.S. gasoline stockpiles dropped by 1.4 million barrels last week, the fourth straight weekly draw, according to the Energy Information Administration. Crude inventories fell by 448,000 barrels, smaller than the median estimate in a Bloomberg survey, which forecast a decrease of 750,000 barrels.
See also: Oil’s Red-Hot Summer Fizzles Out as Virus Comeback Foils Rally
Delta’s spread has been reflected in a weakening of the oil’s market structure. The prompt timespread for Brent was 45 cents a barrel in backwardation — a bullish signal where near-dated contracts are more expensive than later-dated ones. That compares with 92 cents at the end of July.
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