Oil prices slipped for a second day on Tuesday on worries about slower fuel demand growth as outbreaks of the highly contagious COVID-19 variant Delta sparked new mobility restrictions around the world. US West Texas Intermediate (WTI) crude futures fell 14 cents, or 0.2%, to $72.77 a barrel at 0045 GMT, extending a 1.5% loss on Monday. Brent crude futures dipped 10 cents, or 0.1%, to $74.58 a barrel, after sliding 2% on Monday. The flare-up in cases of the Delta variant comes as the Organization of the Petroleum Exporting Countries (OPEC), Russia, and allies, together known as OPEC+, are set to meet on July 1 to discuss easing their supply curbs. OPEC’s demand forecasts show that in the fourth quarter global oil supply will fall short of demand by 2.2 million barrels per day (bpd), giving the producers some room to agree to add output.
“Oil prices fell on concerns that OPEC+ will decide to meaningfully boost output later this week just as the Delta variant of the coronavirus spreads,” Commonwealth Bank commodities analyst Vivek Dhar said in a note. Spain and Portugal, favorite summer holiday destinations for Europeans, imposed new restrictions on unvaccinated Britons on Monday, while 80% of Australians faced tighter curbs due to flare-ups of the virus across the country. Talks on a travel corridor between the United States and Britain also slowed, partly on concerns about a rise in cases of the Delta variant in Britain, the Financial Times reported, citing officials. Analysts expect OPEC+ to step up supply by about 500,000 bpd in August, as the market has tightened on strong growth in fuel demand in the United States and China, the world’s two biggest oil consumers.
Investors will be looking to the latest US inventory data to reinforce that view, with analysts expecting crude stocks to extend their fall for a sixth straight week, while gasoline stocks also declined, a preliminary Reuters poll showed. Seven analysts estimated, on average, that US crude stocks fell by about 4.5 million barrels in the week to June 25, in a poll conducted ahead of reports from the American Petroleum Institute, an industry group, on Tuesday and the Energy Information Administration (EIA), on Wednesday.