Oil resumed gains as investors bet the global demand recovery will remain intact despite a resurgence in Covid-19 leading to tighter restrictions on movement in many regions.
Futures in New York rose 0.3% to trade near $72 a barrel after dipping Monday. The rebound in key energy consumers such as the U.S. and China has helped to underpin increasing fuel consumption and drained bloated stockpiles built up during the pandemic. The fast-spreading delta variant, however, has raised some concerns about the short-term demand outlook.
Delta has interrupted a rally in oil that started late last year and has prices heading for only the second monthly drop since October. The flare-up has crimped fuel demand in some regions and coincided with an agreement by OPEC+ to add more supply from August. While headwinds are mounting, there are expectations that the market with continue to tighten throughout 2021.
The prompt timespread for Brent was 85 cents a barrel in backwardation — a bullish market structure where near-dated contracts are more expensive than near-dated ones. That compares with 58 cents a week earlier.
Covid-19 infections globally have increased the most in two months due to a surge across the U.S. and low vaccination levels in Southeast Asian nations. The positive test rate in Indonesia is the worst in Asia, while Thailand and Vietnam have introduced curfews to curb the spread of the virus.