Oil prices were mixed on Tuesday, paring earlier gains, as expectations that major producers will not boost supply any time soon were offset by worries over slowing global fuel demand amid a spike in the Delta variant of coronavirus infections.
U.S. West Intermediate crude (WTI) edged down 4 cents, or 0.07% to $67.36 a barrel, after reaching $67.66 earlier.
Brent slid 1.5% on Monday while WTI fell 1.7%.
The prices recovered from the previous day’s losses in early Asia trade after four sources told Reuters that OPEC+ – the Organization of the Petroleum Exporting Countries and its allies, including Russia – believes oil markets do not need more crude than they plan to release in the coming months, despite U.S. pressure to add supplies to check an oil price rise.
Last week, U.S. President Joe Biden’s administration urged the producer group to boost oil output to tackle rising gasoline prices that they see as a threat to the global economic recovery.
But the market ran out of steam mid-session amid concerns over the resurgence in the COVID-19 pandemic.
“The overall market sentiment is weak,” said Tetsu Emori, CEO of Emori Fund Management Inc.
“High fuel demand season in northern hemisphere summer is almost ending, while the spreading pandemic is delaying a recovery in global fuel demand,” Emori said, predicting a continued bearish tone in the markets going forward.
Worries over weaker demand in China, the world’s biggest oil importer, grew on Monday after the nation’s daily crude processing last month fell to the lowest since May 2020 as independent plants slashed production amid a tighter quotas, high inventories and weakening profits.
China’s factory output and retail sales growth also slowed sharply and missed expectations in July, as new COVID-19 outbreaks and floods disrupted business operations, adding to signs the economic recovery is losing momentum.
Hedge funds sold petroleum last week for the sixth time in eight weeks as resurgent coronavirus infections in China, Europe and North America dampened hopes of a rapid resumption in long-distance passenger aviation.
Still, the market shrugged off rising output in U.S. shale oil, Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd said.
U.S. shale oil output is expected to rise to 8.1 million barrels per day (bpd) in September, the highest since May 2020, according to the Energy Information Administration’s monthly drilling productivity report on Monday.
“WTI has a support at around $65 and investors tend to look for bargains whenever the benchmark gets closer to the level as we have seen on Monday and last week,” Tazawa said.