Oil was set to end the week roughly where it started, having recouped most of a rout on Monday with three days of gains driven by signs of recovering demand.
West Texas Intermediate futures were steady near $72 a barrel of Friday after rallying about 8% in the past three sessions. Crude plunged on Monday as fears over the delta coronavirus variant’s spread triggered a selloff across financial assets. But prices have since rebounded on expectations that the oil demand recovery hasn’t been derailed, and will soon strain global inventories.
It’s a “benign end to a volatile week,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “The supply situation remains tight.”
Crude has rallied more than 40% this year as the rollout of vaccines stokes energy demand and drains the glut that built up during the worst of the pandemic. Data this week showed gasoline demand is essentially back to normal in many of the biggest consuming countries. Meanwhile, crude inventories at the U.S. storage hub in Cushing, Oklahoma, are falling fast.
The 7.5% price slump on Monday came just a day after the Organisation of Petroleum Exporting Countries and its allies led by Saudi Arabia and Russia finalised an agreement to gradually restore production they halted during the pandemic. Traders initially worried the group was opening the taps at the wrong moment, but those concerns soon subsided in the face of OPEC+’s resolve to proceed cautiously.
“The sell-off was ultimately sparked by external factors,” said Fritsch. “The OPEC+ agreement on its future production strategy will, if anything, lend support to prices, at least in the short to medium term.”
Still, the virus continues to be a challenge. The US is “at another pivotal moment” with Covid-19 cases once again climbing, according to the Centers for Disease Control and Prevention. Infections in France have more than doubled in the past week, and South Korea has extended social-distancing measures amid a record number of cases.
© 2021 Bloomberg