Oil fell further below $74 a barrel on Friday but was on track to end the week largely unchanged after rebounding from a sharp drop on Monday, underpinned by expectations that supply will remain tight as demand recovers.
The price of oil and other riskier assets tumbled at the start of the week on concern about the impact on the economy and demand from surging cases of the COVID-19 Delta variant in the United States, Britain, Japan and elsewhere.
Brent crude was down 11 cents, or 0.2%, at $73.68 a barrel by 0810 GMT after jumping 2.2% on Thursday. U.S. West Texas Intermediate (WTI) crude dropped 18 cents, or 0.3%, to $71.73 a barrel, following a 2.3% gain on Thursday.
“Clearly, oil bulls are back in town,” said Stephen Brennock at oil broker PVM. “But that is not to say that virus concerns have completely vanished.”
For the week, Brent was set to end the week flat, having declined in the previous three weeks. U.S. crude was also poised to remain steady over the week.
Both contracts fell about 7% on Monday but have recouped all of those losses with investors expecting demand to stay strong and the market to receive support from falling oil stockpiles and rising rates of vaccinations.
Demand growth is expected to outpace supply following Sunday’s deal by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, to add back 400,000 barrels per day (bpd) each month from August.
ANZ Research analysts said in a report that the market was starting to sense the 400,000 bpd increase will not be enough to keep the market balanced, and inventories in the United States and across OECD countries continue to fall.
U.S. crude inventories rose by 2.1 million barrels last week, up for the first time since May, government figures showed. But stocks at the Cushing, Oklahoma delivery point for U.S. crude hit their lowest since January 2020.
Source: Reuters (Additional reporting by Sonali Paul in Melbourne and Roslan Khasawneh in Singapore; Editing by David Clarke)