Oil prices remain steady as delta variant weighs on demand recovery

Oil prices remained steady on Thursday as the delta variant of the coronavirus continues to weigh on the demand outlook, offsetting a decline in US Gulf of Mexico output because of damage caused by Hurricane Ida.

Brent crude rose 4 cents to $72.64 a barrel by 0901 GMT and West Texas Intermediate (WTI) crude fell 11 cents, or 0.16 percent, to $72.64.

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About 77 percent of US Gulf production remained offline on Tuesday, equating to about 1.4 million barrels per day (bpd). The market has lost about 17.5 million barrels of oil so far.

The Gulf’s offshore wells make up about 17 percent of US output.

US crude oil production is expected to fall by 200,000 bpd in 2021 to 11.08 million bpd, the US Energy Information Administration (EIA) said on Wednesday, noting that Hurricane Ida should force a bigger decline than its previous forecast for a drop of 160,000 bpd.

However, prices were pressured by the US Energy Information Administration on Wednesday cutting its 2021 global oil demand growth forecast with little change to its 2022 estimate.

“The latest wave of the coronavirus, the spread caused by the delta variant, made investors cautious and pragmatic last month,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

“This pessimism has been reflected in the latest Short-Term Energy Outlook released by the EIA yesterday afternoon.”

Also weighing on sentiment, the US Federal Reserve cut its forecast for US GDP growth this year owing to the resurgence of COVID-19.

American Petroleum Institute (API) data showed that crude drawdown for the week ended Sept. 3 was smaller than expected in a Reuters poll, but gasoline and distillate drawdowns were bigger than expected.

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