Oil slips but set to end week steady on tight supply

Both contracts fell about 7% on Monday but managed to recoup the losses

LONDON:

Oil edged further below $74 a barrel on Friday but was on track to end the week little changed after a surprising recovery from Monday's slide, underpinned by expectations that supply will remain tight as demand recovers.

The price of oil and other riskier assets tumbled at the start of the week on concern over the impact on the economy and crude demand from surging cases of the Covid-19 Delta variant in the United States, Britain, Japan and elsewhere.

Brent crude was down $0.1 at $73.69 a barrel by 1200 GMT after jumping 2.2% on Thursday. US West Texas Intermediate (WTI) crude dropped $0.08 to $71.83, having gained 2.3% on Thursday.

"Clearly, oil bulls are back in town," said Stephen Brennock at oil broker PVM. "But that is not to say that virus concerns have completely vanished."

Brent was set to end the week unchanged, having declined in the previous three weeks. US crude was also poised to remain steady over the week.

"Oil's comeback has surprised me," said Jeffrey Halley of brokerage OANDA.

Both contracts fell about 7% on Monday but have recouped all of those losses, with investors expecting demand to stay strong and the market to receive support from falling oil stockpiles and rising vaccination rates.

Demand growth is expected to outpace supply after Sunday's deal between the Organisation of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to add back 400,000 barrels per day (bpd) each month from August.

ANZ Research analysts said in a report that the market was starting to sense the 400,000 bpd increase will not be enough to keep the market balanced and inventories in the United States and across OECD countries would continue to fall.

US crude inventories rose by 2.1 million barrels last week, but stocks at the Cushing, Oklahoma delivery point for US crude hit their lowest since January 2020.