Brent oil was steady after tumbling to an eight-week low amid a broader market rout stoked by a Covid-19 resurgence, which has raised concerns about the short-term outlook for energy demand.
Futures in London traded near $69 a barrel after plunging 6.8% on Monday, the most since March. The fast-spreading delta variant has led to a surge in virus cases and renewed restrictions as it sweeps across the globe from Asia to Europe. A stronger dollar has also weighed on crude, making raw materials priced in the U.S. currency less attractive to investors.
Oil has run into stiff headwinds in July after rising in seven of the past eight months as the global economy rebounded from the pandemic. The salvaged OPEC+ deal has removed a layer of uncertainty for the market, but the latest Covid-19 resurgence is a reminder that the recovery will be bumpy.
The U.S. warned citizens to not travel to the U.K. and Indonesia amid a rise in infections in the two nations. Southeast Asia’s largest economy has surpassed India in new daily cases, cementing its position as Asia’s new virus epicenter, while several of its neighbors are also seeing a surge in cases.
“There is still potentially more downside pain ahead in the short-term, but in the bigger picture, the delta variant will only slow the global recovery and not bring it to a halt,” said Jeffrey Halley, an analyst at Oanda Asia Pacific.
- Brent for September settlement gained 0.3% to $68.83 a barrel on the ICE Futures Europe exchange at 6:35 a.m. in London after closing at the lowest level since May 24 on Monday.
- West Texas Intermediate for August, which expires Tuesday, rose 0.2% to $66.52 on the New York Mercantile Exchange after declining 7.5% on Monday, the most since September.
- The more-active September contract climbed 0.5% to $66.67 after falling 7.3% in the previous session.
The prompt timespread for Brent eased to 55 cents a barrel in backwardation — a bullish structure where near-dated prices are more expensive than later-dated ones. That compares with 78 cents a week earlier.
While oil has run into some turbulence, there are expectations that the market will tighten further 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.
Other market news:
- The Biden administration is poised to issue new cybersecurity regulations for pipelines and liquefied natural gas facilities in the aftermath of the April hack.
- Motiva Enterprises LLC is eying the revival of a multibillion-dollar expansion project at its Texas Gulf Coast refinery in 2023 that would produce petrochemicals used to make everything from plastic water bottles to grocery bags.