Oil edged up to about $69 a barrel on Tuesday after the previous session’s 7 percent slide, as a tight physical market offset some concerns about the impact on demand from rising COVID-19 infections and higher OPEC+ supply.
In a sign of tight supply, crude inventories in the United States are expected to fall for a ninth week.
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OPEC expects world oil demand to grow by 6.6 percent in 2021 with the expansion focused on the second half of the year.
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“Global demand still appears to be recovering dynamically, so the oil market should end up in supply deficit in the coming months despite the production hikes to be implemented by OPEC+,” said Eugen Weinberg of Commerzbank.
Brent crude gained 41 cents, or 0.6 percent, to $69.03 by 0930 GMT, after sliding 6.8 percent on Monday. US crude for August, which expires later on Tuesday, was up 33 cents, or 0.5 percent, at $66.75, after falling 7.5percent on Monday. The September US crude contract was up 0.5 percent at $66.67.
Monday’s selloff, which pushed oil to a two-month low and hit other risk assets like equities, was driven by concern that rising COVID-19 infections could cause demand to weaken again, just as OPEC+ has decided to add supply.
“As things stand, it is hard to see prices staging a comeback unless virus jitters are brought back under control,” said Stephen Brennock of oil broker PVM.
The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, agreed on Sunday to increase output from August, unwinding more of the supply curbs put in place last year when the pandemic first struck.
The Delta coronavirus variant is now the dominant strain worldwide, US officials said on Friday.
Still, Julius Baer analyst Carsten Menke said it was unlikely to jeopardize the ongoing recovery of global growth, even though it could cause “regional hiccups.”
Read more: OPEC+ agrees oil supply boost after Saudi Arabia, UAE reach compromise
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