London — Oil prices dropped for a second day on Tuesday on growing concern that mobility restrictions imposed after the latest outbreaks of the Delta variant of Covid-19 would slow demand for fuel.
Brent crude futures fell 67c, or 0.9%, to $74.01 a barrel by 9.01am GMT, after slumping 2% on Monday.
US West Texas Intermediate crude futures fell 83c, or 1.1%, to $72.08/bbl, extending a 1.5% loss on Monday.
Despite the virus flare-up, the market still broadly expects vaccine rollouts to brighten the demand outlook, analysts said.
“The narrative of the past few months has not changed: the war against the virus is being gradually won, the global economy and oil demand are recovering,” said PVM Oil analyst Tamas Varga. “Oil supply is being effectively managed, therefore dips are probably viewed by ardent bulls as attractive buying opportunities.”
The flare-up in cases of the Delta variant comes as Opec, Russia and allies, together known as OPEC+, are scheduled to meet on Thursday to discuss easing their supply curbs.
OPEC’s demand forecasts show that global oil supply will fall short of demand by 2.2m bb/day in the fourth quarter, giving the producers some room to agree to add output.
Analysts expect OPEC+ to step up supply in August as the market has tightened on strong growth in fuel demand in the US and China, the world’s two biggest oil consumers.
Spain and Portugal, which are favourite summer holiday destinations for Europeans, imposed new restrictions on unvaccinated Britons on Monday, while 80% of Australians faced tighter curbs due to flare-ups of the virus across the country.
Talks on a travel corridor between the US and the UK also slowed, partly on concerns about a rise in cases of the Delta variant in the UK, the Financial Times reported, citing officials.
Investors will be looking to the latest US inventory data for cues on the outlook for demand. Crude stocks are likely to have their decline for a sixth straight week, while petroleum stocks also declined, according to a preliminary Reuters poll.