Crude oil stabilized above $ 71 a barrel as investors weighed the consumer risk posed by the spread of the delta variant of the coronavirus.
The West Texas Intermediatete was up 0.3% in Asian trading after falling 3.6% on Monday, its biggest loss in two weeks. The highly infectious variant of covid-19 is forcing governments to re-impose or extend some restrictions, and investors are following a spike in cases in the worlds largest crude market, China.
In Indonesia, Asias largest gasoline importer, restrictions have been extended in some regions until Aug. 9, President Joko Widodo said late on Monday. Even before that decision, the impact on energy demand was evident, as motor fuel imports fell by about a quarter, while local use declined.
In the first quarter, crude recovered strongly as vaccines allowed the main economies to reopen, boosting demand for oil and depleting the excess accumulated during the initial wave of the pandemic. The pace of earnings slowed in July as the delta variant began to pose a greater challenge, as the Organization of Petroleum Exporting Countries pushed ahead with restoring more production to the market.
In July, Saudi Arabia, Kuwait and the United Arab Emirates, the top three OPEC oil exporters in the Middle East, pushed crude shipments to multi-month highs. Currently, the alliance plans to increase collective production by 400,000 barrels per day each month until all stopped production is restored.
In China, delta has breached the some of the strictest virus defenses in the world. A total of 61 new cases were tallied on Aug. 2, a day after the nation logged the biggest number of local infections from the current outbreak. Those affected came from areas including Hunan, Hubei, Henan, Beijing and Shanghai, according to the National Health Commission. Elsewhere in Asia, Thailand reported almost new 19,000 infections.
Later on Tuesday, investors will get a brace of insights into market conditions. BP Plc is due to present quarterly earnings, offering executives an opportunity to comment on the global outlook. In the U.S., the American Petroleum Institute will issue its weekly report on inventories.
Brent‘s prompt time spread was 71 cents a barrel in backwardation. Although that’s a bullish pattern, with near-term prices above those further out, its down from 96 cents a barrel one week ago.