Oil held the bulk of a three-day advance to trade above $71 a barrel on optimism that rising demand will tighten the global market.
West Texas Intermediate was 0.3% lower in early Asian trading after rallying more than 8% in the preceding three sessions. The run of gains means prices are little changed on the week, having recouped almost all of Monday’s slump, when crude plunged amid concern the spread of the delta coronavirus variant would crimp consumption just as the OPEC+ alliance added more barrels.
Crude has rallied this year as the rollout of vaccines permits economies to reopen, stoking energy demand and draining the glut that built up during the pandemic. While the emergence and spread of the highly infectious delta variant has set back that process, especially in parts of Asia, investors are betting the broader positive narrative remains intact. Data this week showed gasoline demand is essentially back to normal in many of the biggest oil-consuming countries, as well as lower crude holdings at the key Cushing hub.
Still, challenges remain. The U.S. is “at another pivotal moment,” with Covid-19 cases once again climbing and beds at some hospitals filling up, according to the Centers for Disease Control and Prevention. In Europe, the number of infections in France has more than doubled in the past week.
The Organization of Petroleum Exporting Countries and its allies plan to add 400,000 barrels a day to the market in August and in subsequent months until supply cuts imposed at the outset of the pandemic have been fully reversed. Additional supplies this half may come from Iran should Tehran manage to strike a nuclear deal permitting U.S. sanctions on its crude to be lifted.
Brent’s prompt time spread was 62 cents a barrel in backwardation on Friday. That’s a bullish pattern — with near-dated prices above those further out — and unchanged from the level seen a week ago.