Oil futures rise as Covid-19 Delta variant spreads

London —  Oil prices steadied on Thursday as the International Energy Agency (IEA) said the spread of the Delta variant of the coronavirus would slow the global oil demand recovery.

Brent crude futures rose 18c, or 0.25%, to $71.62 a barrel by 8.48am GMT, after dipping to a session-low of $71.19.

US West Texas Intermediate (WTI) crude futures edged up 9c, or 0.13%, to $69.34.

The international energy watchdog said in its monthly report that rising demand for oil reversed course in July and was set to proceed more slowly for the rest of 2021 after the latest wave of Covid-19 infections led countries to reintroduce restrictions.

“Growth for the second half of 2021 has been downgraded more sharply, as new Covid-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the Paris-based IEA said.

“We now estimate that demand fell in July as the rapid spread of the Covid-19 Delta variant undermined deliveries in China, Indonesia and other parts of Asia.”

The IEA put the demand slump in July at 120,000 barrels per day (bpd) and predicted growth would be half a million bpd lower in the second half of the year compared to its estimate last month, noting some changes were due to revisions in data.

That came a day after the US urged oil cartel Opec and its allies, known as Opec+, to boost oil output to tackle rising gasoline prices it sees as a threat to the global economic recovery.

In July, Opec agreed to boost output each month by 400,000 bpd versus the previous month, starting in August, until the rest of their record cuts of 10-million bpd (about 10% of world demand), made in 2020, are phased out.

“The [Joe] Biden administration said that the recently agreed production increases will not fully offset previous production cuts imposed during the pandemic,” ANZ said in a note. 

Reuters