Oil prices edge higher as traders play down worries over delta variant

Oil futures were slightly higher Tuesday, with traders largely set aside worries about the impact on energy demand from the spread of the delta variant of the coronavirus that causes COVID-19.

West Texas Intermediate crude for September delivery

the U.S. benchmark, was14 cents, or 0.2%, at $72.05 a barrel on the New York Mercantile Exchange.

Front-month September Brent crude
the global benchmark, was up 30 cents, or 0.4%, at $74.80 a barrel on ICE Futures Europe. October Brent

the most actively traded contract, was up 23 cents, or 0.3%, at $73.93 a barrel.

“The delta variant appears to have lost much of its scare factor for the oil market,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.

Oil futures have erased the sharp drop seen on July 19 following the agreement by members of the Organization of the Petroleum Exporting Countries and their allies — a group together known as OPEC+ — to raise output by 400,000 barrels a day each month beginning in August until 5.8 million barrels in existing output curbs are eliminated.

That drop, however, appeared to have little to do with the OPEC+ decision, Fritsch and other analysts have said. Instead, it was driven largely by concerns the spread of COVID cases caused by the delta variant could prompt renewed business lockdowns that would jeopardize the outlook for a continued global economic recovery and rising demand for crude oil.

Now, “hopes are pinned on the success of the advancing vaccination campaigns and on the fact that new infections — as can be seen in India and the United Kingdom – may soon pass their peak in other countries, too,” Fritsch wrote.

Meanwhile, the oil market remains “slightly undersupplied” despite OPEC+ plans to boost oil output and doesn’t run the danger of becoming oversupplied until 2022, he said.

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