(Bloomberg) -- Oil declined, paring a modest weekly gain, as the fast-spreading delta virus variant continued to cloud the demand outlook.
Futures dropped below $69 a barrel in New York after slipping on Thursday. The latest Covid-19 wave is leading to tighter curbs on movement across the globe, although there are mixed assessments on its impact. The International Energy Agency reduced its demand forecasts for the rest of the year, while Goldman Sachs Group Inc. predicts only a transient hit to consumption.
“This week has laid bare the contrasting views on the impact of the new wave of Covid caused by the delta variant on the world’s appetite for oil,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd in London. “Consensus is a rare commodity.”
Delta has interrupted a rally that pushed oil prices more than 50% higher in the first half of the year as major economies such as the U.S. got moving again. A critical concern is the flare-up in China, where authorities have taken an aggressive approach to containing the outbreak.
Oil’s market structure has also weakened. Brent’s prompt timespread was 42 cents in backwardation -- a bullish signal where near-dated contracts are more expensive than later ones. That compares with 92 cents at the end of July.
Global oil demand “abruptly reversed course” last month, falling slightly after surging by 3.8 million barrels a day in June, the IEA said in its monthly market report on Thursday. The drop in consumption comes as OPEC+ hikes output with a goal to steadily revive all of the production halted during the pandemic.
While China and parts of Southeast Asia are seeing a hit to consumption from the virus restrictions, at least one Indian refiner is ramping up crude processing as demand climbs after a devastating wave earlier this year.
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