Oil prices stabilized on Tuesday after falling nearly 7% in the previous session as producers signed a new supply deal and a broader market downturn driven by concerns over growing COVID-19 infections.
The selloff, which pushed prices to their lowest in two months, was driven by concerns about the Delta variant of the coronavirus that is rampaging through populations, analysts said, with equities falling and bonds rising.
Increasing coronavirus Delta variant cases and travel restrictions doubts in some Asian and European countries have significantly increased the smokescreen over crude oil demand.
However, the physical market for crude oil has tightened in recent months as the ongoing economic recovery is likely to continue to support oil demand in the second half of the year.
Significantly more contagious than its predecessors, the Delta variant of the coronavirus is now the dominant strain worldwide, US officials said on Friday.
It has been detected in nearly 100 countries worldwide, and the irregular implementation of vaccination programs in many places is undermining the battle against the virus and increasing the likelihood of further lockdowns that are bound to hit demand for petroleum products.
Brent crude rose 70 cents, or 1%, to $69.32 a barrel at 0651 GMT. The West Texas Intermediate (WTI) crude contract for August delivery, which expires on Tuesday, rose 86 cents, or 1.3%, to $67.28 a barrel. September deliveries of WTI crude rose 1.2% to $67.14 per barrel.
Still, analysts said high-frequency indicators show weekend restaurant reservations in the United States, the world’s largest oil consumer, are at pre-COVID levels, while domestic flights are at their highest since the start of the pandemic.
Oil prices took an inevitable hit after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, agreed on Sunday to increase production.
The OPEC+ deal removes most of the supply constraints that have supported the market for a year. OPEC+ is blocking the market supply of about 5.8 million barrels per day (bpd) of crude oil, but this figure will decrease by 2 million barrels by the end of 2021.
This deal could bring some stability to the market in the coming months and bolster the market if negatives such as reclosures are not as devastating as expected.
Despite recent COVID-19 concerns and the drop in crude oil prices, some analysts expect the increased supply to be absorbed by a gradual return of economic activity.
