Oil prices went up higher yesterday as investors bet that tight supply and rising vaccination rates will help to offset any impact on demand from surging COVID-19 cases worldwide.
Brent crude futures rose 31 cents or 0.4 per cent to $74.81 a barrel while the US West Texas Intermediate (WTI) crude futures rose 27 cents or 0.4 per cent to $72.18.
Benchmark prices held their ground even after the United States issued travel warnings to Spain and Portugal because of rising COVID-19 cases.
A White House official told Reuters that wider travel curbs would not be lifted, citing the highly infectious Delta variant and rising domestic infections.
“With oil demand growth likely outpacing supply growth in the near term, we expect oil tightness over the summer, which should boost oil prices,” UBS analysts said in a research note.
In one encouraging sign for fuel demand, Britain on Monday reported its lowest daily total of new COVID-19 cases since July 4, suggesting a recent surge in infections has passed its peak.
Analysts tracking mobility data remain confident about fuel demand, counting on vaccinations to guard against strict new lockdowns.
Global oil markets are expected to remain in deficit despite a decision by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, to raise production through the rest of the year.
“Robust road traffic data across most major regions suggests rising infections are having minimal impact,” ANZ Research analysts said.
Investors are awaiting inventory data from the American Petroleum Institute and the US Energy Information Administration on Wednesday for further evidence that demand is holding up.
Five analysts polled by Reuters estimated, on average, that US crude stocks fell by about 3.4 million barrels and gasoline stocks fell by 400,000 barrels in the week to July 23.