Oil held the bulk of a three-day advance to trade above $71 a barrel amid optimism that rising demand will tighten the global market.
West Texas Intermediate edged 0.5% lower, after rallying more than 8% in the preceding three sessions.
That run of gains means that prices are little changed on the week, having recouped most of Monday’s slump, when crude plunged on concern the spread of the delta coronavirus variant would crimp consumption just as the OPEC+ alliance moved to add more barrels.
Crude has rallied this year as the rollout of vaccines permits economies to reopen, stoking energy demand and draining the glut that built up during the pandemic.
While the emergence and spread of the highly infectious delta variant has set back that process, especially in parts of Asia, investors are betting the broader positive narrative remains intact.
Data this week showed gasoline demand is essentially back to normal in many of the biggest oil-consuming countries, as well as lower crude holdings at the key Cushing hub.
Still, challenges remain. The U.S. is “at another pivotal moment,” with Covid-19 cases once again climbing and beds at some hospitals filling up, according to the Centers for Disease Control and Prevention. Elsewhere, the number of infections in France has more than doubled in the past week, and South Korea has extended social-distancing steps amid record number of cases.
While there is growing concern over delta’s impact, “the oil complex may have overreacted,” said Vandana Hari, founder of Vanda Insights in Singapore. “That is not to say that the sanguine demand optimism has fully returned. It will remain vulnerable to the slightest of worries over pockets of resurgence. Broadly, that could keep a lid on prices, not too far from current levels.”
WTI for September delivery eased 0.5% to $71.58 a barrel on the New York Mercantile Exchange at 7:10 a.m. in London.Most-active prices fell 0.3% this week.
Brent for September settlement dipped 0.5% to $73.46 a barrel on the ICE Futures Europe exchange.
The Organization of Petroleum Exporting Countries and its allies plan to add 400,000 barrels a day to the market in August and in subsequent months until supply cuts imposed at the outset of the pandemic have been fully reversed. Additional supplies this half may come from Iran should Tehran manage to strike a nuclear deal permitting U.S. sanctions on its crude to be lifted.
Brent’s prompt time spread was 62 cents a barrel in backwardation on Friday. That’s a bullish pattern — with near-dated prices above those further out — and unchanged from the level seen a week ago.