Oil prices steady as OPEC fuels demand hope amid virus worries

NEW YORK — Oil prices steadied on Tuesday as broad hopes for a demand recovery persisted, fueled by comments from OPEC’s secretary general, slightly overshadowing travel curbs due to new outbreaks of the highly contagious Delta variant of the coronavirus.

Brent crude futures settled up 8 cents or 0.1% at $74.76 a barrel, having slumped by 2% on Monday.

US West Texas Intermediate (WTI) crude futures settled up 7 cents or 0.1% at $72.98 a barrel, after a 1.5% retreat on Monday.

Demand in 2021 was expected to grow by 6 million barrels per day (bpd), with 5 million bpd of that in the second half, Organization of the Petroleum Exporting Countries (OPEC) Secretary General Mohammad Barkindo told on Tuesday’s meeting of the Joint Technical Committee of OPEC+, an alliance made up of OPEC states, Russia and their allies.

“The current ‘wild card’ factor is the ‘Delta variant’ of the pandemic that is resulting in rising cases and renewed restrictions in many regions,” he said in a speech, a copy of which was seen by Reuters.

The producer group is expected to gradually ramp up production in response to demand.

“Barkindo’s comments suggest that OPEC is not going to raise production quickly enough to keep up with demand,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

OPEC’s demand forecasts show that in the fourth quarter global oil supply will fall short of demand by 2.2 million bpd, giving the producers some room to agree to add output.

The market expects the rollout of vaccination programs to brighten the demand outlook, even as the new variant rises, analysts said.

“The narrative of the past few months has not changed: the war against the virus is being gradually won, the global economy and oil demand are recovering,” said PVM Oil analyst Tamas Varga.

“Oil supply is being effectively managed. Therefore, dips are probably viewed by ardent bulls as attractive buying opportunities.”

“The market has grown relatively immune to COVID-19 developments, but if lockdowns occur in larger demand centers in Asia, we may see the market’s nonchalance abate.”

Spain and Portugal, favorite summer holiday destinations for Europeans, imposed new restrictions on unvaccinated Britons on Monday, while Australians also faced tighter curbs owing to flareups of the virus across the country.

Investors will be looking to the latest US Energy Department oil inventory data on Wednesday for cues on the demand outlook. —