Oil prices fell on Tuesday, paring earlier gains, as expectations that major producers will not boost supply any time soon were outweighed by worries over slowing demand amid a spike in the Delta variant of coronavirus infections.
Brent crude was down 51 cents, or 0.7%, at $69.00 per barrel as of 0703 GMT, after rising as high as $69.77 earlier in the session.
U.S. West Intermediate crude (WTI) slid 52 cents, or 0.8%, to $66.77 a barrel, after reaching $67.66 earlier.
Japan was set to extend its state of emergency in Tokyo and other regions to Sept. 12 and widen curbs to seven more prefectures, as COVID-19 cases spike while cases are set to “rise substantially” in Sydney in the coming weeks despite a prolonged lockdown, authorities said on Tuesday.
On Monday, Brent slid 1.5% while WTI fell 1.7%.
The prices recovered from those losses in early Asia trade after four sources told Reuters that OPEC+, which groups members of the Organization of the Petroleum Exporting Countries and other producers such as Russia, believes oil markets do not need more crude than they plan to release in the coming months.
Last week, U.S. President Joe Biden’s administration urged the producer group to boost oil output to tackle rising gasoline prices that they see as a threat to the global economic recovery.
But the market ran out of steam mid-session amid concerns over the resurgence in the COVID-19 pandemic.
“The overall market sentiment is weak,” said Tetsu Emori, CEO of Emori Fund Management Inc.
“High fuel demand season in the northern hemisphere summer is almost ending, while the spreading pandemic is delaying a recovery in global fuel demand,” Emori said, predicting a continued bearish tone in the market.
Worries over weaker demand in China, the world’s biggest oil importer, grew on Monday after the nation’s daily crude processing in July fell to its lowest level since May 2020 as independent plants slashed production amid tighter quotas, high inventories and weakening profits.
China’s factory output and retail sales growth also slowed sharply and missed expectations in July, as new COVID-19 outbreaks and floods disrupted businesses.
Hedge funds sold petroleum last week for the sixth time in eight weeks as resurgent coronavirus infections in China, Europe and North America dampened hopes of a rapid resumption in long-distance air travel.
Still, the market shrugged off rising output in U.S. shale oil, Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd said.
U.S. shale oil output is expected to rise to 8.1 million barrels per day (bpd) in September, the highest since May 2020, according to the Energy Information Administration’s monthly drilling productivity report on Monday.
“WTI has a support at around $65 and investors tend to look for bargains whenever the benchmark gets closer to that level as we have seen on Monday and last week,” Tazawa said.
Source: Reuters (Reporting by Yuka Obayashi; Editing by Kenneth Maxwell and Jason Neely)