Oil drops on worries about impact of virus surges

London

OIL prices dropped for a second day on Tuesday on worries about slower fuel demand growth as outbreaks of the highly contagious Delta variant of coronavirus sparked new mobility restrictions around the world.

Brent crude futures fell 67 cents, or 0.9 per cent, to US$74.01 a barrel by 0901 GMT, after slumping 2 per cent on Monday.

US West Texas Intermediate crude futures fell 83 cents, or 1.1 per cent, to US$72.08 a barrel, extending a 1.5 per cent loss on Monday.

Despite the virus flare-up, the market still broadly expects vaccine rollouts to brighten the demand outlook, analysts said.

"The narrative of the past few months has not changed: the war against the virus is being gradually won, the global economy and oil demand are recovering," said PVM Oil analyst Tamas Varga.

"Oil supply is being effectively managed therefore dips are probably viewed by ardent bulls as attractive buying opportunities."

The flare-up in cases of the Delta variant comes as the Organization of the Petroleum Exporting Countries, Russia and allies, together known as Opec+, are set to meet on July 1 to discuss easing their supply curbs.

Opec's demand forecasts show that in the fourth quarter, global oil supply will fall short of demand by 2.2 million barrels per day, giving the producers some room to agree to add output.

Analysts expect Opec+ to step up supply in August as the market has tightened on strong growth in fuel demand in the United States and China, the world's two biggest oil consumers. REUTERS