Crude rallied strongly in the first half of the year as the rollout of vaccines allowed major economies to reopen, boosting oil demand and draining the glut built up during the initial wave of the pandemic. The pace of gains slowed in July as delta began to pose a greater challenge, while the Organization of Petroleum Exporting Countries pushed ahead with restoring more output.
“The sentiment in stock markets being positive today, commodity prices — including oil — also benefit,” said Hans van Cleef, senior energy economist at ABN Amro Bank. After Monday’s price drop, “the bulls see this as a buying momentum. But the fears of the delta variant affecting future oil demand continues to cap the upside.”
In China, delta has breached some of the strictest virus defenses in the world. Authorities reported 61 confirmed cases and 23 asymptomatic infections on Tuesday. Thailand reported almost 19,000 infections, and in Indonesia, the biggest gasoline importer in Asia, restrictions have been extended in some regions until Aug. 9.
The rise in case worldwide could be taking a toll on oil consumption worldwide, slowing down a rebound from earlier this year.
“We are seeing probably a slight muting of demand globally, but I’m talking about a very slight muting of demand at this time,” BP Plc CEO Bernard Looney said.