Oil steadied after a two-day advance as investors bet the global demand recovery will remain intact despite the latest wave of Covid-19 that’s led to tighter restrictions on movement in many countries.
Futures in New York traded near $69 a barrel after rising more than 4% over the previous two sessions. US gasoline stockpiles fell last week to the lowest level since November, while crude inventories marginally declined, government data show. Goldman Sachs Group Inc. predicts the net impact of the delta virus variant on oil demand is likely to be moderate.
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. While the economic rebound in the US and Europe has buoyed oil, steps to rein in delta, particularly in China, are clouding the outlook. The International Energy Agency will release its monthly report later Thursday, giving an indication of what impact it sees the variant having on demand.
“Markets have so far been keen to overlook short-term demand weakness brought about by the virus,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. There may be a pullback if the outbreaks don’t ease, he added.
West Texas Intermediate for September delivery was little changed at $69.30 a barrel on the New York Mercantile Exchange at 12:01 p.m. in Singapore after rising 4.2% over the past two sessions.
Brent for October settlement added 0.1% at $71.49 on the ICE Futures Europe exchange after climbing 1.2% on Wednesday.
US gasoline futures was steady at $2.3053 a gallon
US 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.
Delta’s spread has been reflected in a weakening of oil’s market structure. The prompt timespread for Brent was 39 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.
“If outbreaks spread and rapidly increase in numbers, there is no doubt that China will use its go-to playbook of aggressive mass lockdowns,” said Jeffrey Halley, a senior strategist for Oanda Asia Pacific Pte. “That potential situation is the main threat that I see to global oil prices.”