Oil prices steady as delta variant outbreaks cloud demand prospects

Oil prices steadied on Wednesday after four days of declines with investors still worried about the outlook for fuel demand as the use of rail, air and other forms of transport remained constrained amid surging COVID-19 cases worldwide.

Brent crude was up 70 cents or 1 percent at $69.73 a barrel by 0649 GMT. US oil gained 54 cents or 0.8 percent to $67.13 a barrel.

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“In the short-term, the oil market may be volatile with frequent pull-backs as crude prices are beginning to struggle as demand in Europe and India faces headwinds,” said Avtar Sandu, senior manager, commodities at Phillip Futures in Singapore.

A stronger dollar was also hitting commodities across the board, with metals and precious gold in particular as “equally fragile” as oil, ANZ Research said in a note.

Crude is typically priced in dollars so a stronger greenback makes oil more expensive, hitting demand.

In the United States, more supply is set to hit the market if official forecasts prove right.

US shale oil production is expected to rise to 8.1 million barrels per day (bpd) in September, the highest since April 2020, according to the government’s Energy Information Administration’s monthly drilling output report.

US crude oil and gasoline inventories fell last week, according to two market sources, citing American Petroleum Institute figures on Tuesday, while distillate stocks rose.

Financial markets overall are turning sour in response to the delta variant’s progress, softer US economic data, and a somber reflection on what is going on in Afghanistan, ING analysts said in a note.

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