(Bloomberg) — Oil headed for the first decline in five days as investors assessed the outlook for demand amid a resurgence in Covid-19.
Futures in New York dropped toward $71 a barrel after climbing 8.5% over the past four sessions. There are signs that demand for fuels such as gasoline has increased as vaccination programs are rolled out, although the fast-spreading delta variant has raised concerns about the short-term outlook. Tight restrictions have been renewed including curfews in some places.
“The delta variant continues to hang over the demand recovery,” said Vandana Hari, founder of energy consultant Vanda Insights in Singapore. “It may take some time for the oil bulls to recover their confidence.”
See also: Indonesia’s Positive Covid Test Rate Is Worst in Asia: Chart
The latest virus flare-up has coincided with a salvaged OPEC+ agreement to add more barrels from August, whipping up stiff headwinds for oil and interrupting a price rally. Expectations are for a continued tightening of the market throughout the rest of 2021, however, leading to even higher prices.
While the recovery in key energy consumers such as the U.S. and China has helped to drain bloated crude and fuel stockpiles built up during the pandemic, the aviation sector is lagging. Air travel has jumped in North America, but that’s done little to diminish the massive glut in jet fuel inventories.
The prompt timespread for Brent was 67 cents a barrel in backwardation — a bullish market structure where near-dated prices are more expensive than later-dated ones. That compares with 88 cents at the beginning of July.
See also: At $3 a Gallon, What Can U.S. Do About Gas Prices?: Julian Lee
Covid-19 infections globally increased the most in two months as the spread of the delta variant, a surge across the U.S., and low levels of vaccination in most Southeast Asian nations led to higher numbers. Countries including Thailand and Vietnam are imposing curfews in cities to battle the surge in cases.
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