Oil Prices up as Demand Recovery Overtake Fresh COVID-19 Worries

By Adedapo Adesanya

Oil prices returned to the positive territory on Tuesday as hopes for a demand recovery persisted despite new outbreaks of the highly contagious Delta variant of the coronavirus.

As a result, the Brent futures gained 39 cents or 0.52 per cent to trade at $75.15 per barrel while the West Texas Intermediate (WTI) futures made a 51 cents or 0.70 per cent appreciation to close at $73.49 per barrel.

In recent days, there have been worries about the likely impact of the increase in the COVID-19 Delta variant in Asia and Europe.

In Europe, the delta variant has become dominant in France and Germany, and the United Kingdom on Monday reported its highest COVID-19 cases since January, spurring Spain and Portugal to impose new restrictions on unvaccinated Britons, while 80 per cent of Australians faced tighter curbs due to flare-ups of the virus across the country.

However, the market trend puts this to rest at the moment as analysts expect vaccine rollouts to brighten the demand outlook. Notwithstanding, if cases spiral, there is a possibility this might see prices begin to react negatively.

This development is coming as the Organisation of the Petroleum Exporting Countries and allies (OPEC+) is set to meet on July 1 to discuss easing their supply curbs.

The 23-nation alliance is expected to revive some of the halted supplies it shuttered when demand collapsed, with analysts expecting an increase of 550,000 barrels a day.

According to a forecast, OPEC+ supply will be needed to balance the oil market by 2022.

Also adding support was the American Petroleum Institute (API) on Tuesday reporting a draw in crude oil inventories of 8.153 million barrels for the week ending June 25.

Analysts had predicted a draw of 4.686 million barrels for the week.

In the previous week, the API reported a draw in oil inventories of 7.199 million barrels after analysts had predicted a draw of 3.942 million barrels.

Crude oil inventories have fallen by more than 37 million barrels since the start of 2021, according to API data, but are still up 19 million barrels since January 2020.

The Energy Information Administration (EIA) will on Wednesday release the latest US inventory data for cues on the outlook for demand.