Oil prices edge higher but Delta variant caps gains

London — Oil prices edged higher on Wednesday, supported by a fall in US inventories and geopolitical tensions in the Middle East, but the increasing spread of the coronavirus Delta variant in top consuming countries capped gains.

Brent crude oil futures were up 33c, or 0.5%, to $72.74 a barrel by 8.15am GMT. US West Texas Intermediate (WTI) crude rose 16c, or 0.2%, to $70.72/bbl.

“Bulls have drawn support from US inventory dynamics, with commercial stocks falling to their lowest since January 2020 and indications that the tightening is set to continue,” oil brokerage PVM said.

US stocks of crude fell by 879,000 barrels in the week ended July 30, according to two market sources, citing American Petroleum Institute figures.

Petrol inventories fell by 5.8-million barrels and distillate stocks fell by 717,000 barrels, according to the sources, who declined to be identified.

Tensions in the Mideast Gulf also lent prices some support.

On Tuesday, three maritime security sources claimed Iranian-backed forces seized an oil-product tanker off the coast of the United Arab Emirates, though Iran denied the reports.

This is the second attack on a tanker in the region since Friday, which includes the Strait of Hormuz. The UK and the US are also blaming Iran for the earlier incident, in which drones crashed into the vessel and killed two sailors.

Both futures contracts fell on Tuesday to their lowest since July 21 before regaining some ground by the close, weighed down by the virus spread.

“Worries continue to grow over the spread of the Delta variant in China, which has weighed heavily on oil prices in recent days,” bank ING said.

The US and China, the world’s two biggest oil consumers, are grappling with rapidly spreading outbreaks of the highly contagious Delta variant that analysts fear will limit fuel demand at a time when it traditionally rises in both countries.

In China, the spread of the variant from the coast to inland cities has prompted authorities to impose strict measures to bring the outbreak under control. 

Reuters