Oil held losses below $73 a barrel as a coronavirus resurgence raised concerns about the demand recovery ahead of an OPEC+ meeting this week that’s expected to lead to increased output from the alliance.
Futures in New York edged lower after declining 1.5% on Monday. The more infectious delta variant of the virus has resulted in a spike in U.K. cases and led to renewed restrictions and lockdowns in other regions. OPEC+ may boost August output by 500,000-to-1 million barrels a day when the group meets on Thursday, according to RBC Capital Markets.
Oil is still up around 10% this month as a rebound from the Covid-19 pandemic accelerated in key regions including the U.S. and China, underpinning a surge in fuel consumption and tightening supply worldwide. Futures and swaps in the world’s leading pricing locations are in a bullish backwardation structure, signaling more barrels are needed for the physical market.
The U.K. on Monday reported the most new Covid-19 cases since January, and Hong Kong, Spain and Portugal all imposed new restrictions to visitors from the nation. Authorities are also racing to contain outbreaks in Australia. The virus flare-up may lead to export-focused refiners in Asia trimming processing rates.
OPEC+ expects that global oil markets will remain in deficit this year if it keeps output steady, according to data that technical experts will review on Tuesday ahead of the coalition’s main meeting. Estimates to be presented to the Joint Technical Committee show that demand is poised to exceed supply by 1.7 million barrels a day in August.