However, OPEC's demand outlook remains unchanged: File Image/Pixabay
Initially, a U.S. Energy Information Administration report on Thursday showing that fuel consumption has grown to pre-pandemic levels temporarily detracted investors from their Covid Delta worries and caused what appeared to be a third straight day of price gains for crude.
However, negative sentiment from the International Energy Agency rekindled the worries and forced oil to close lower: Brent lost 13 cents to end the session at $71.31 per barrel, while West Texas Intermediate for September delivery fell 16 cents to settle at $69.09 per barrel.
The EIA report showed that despite the media hoopla over the Delta variant causing rising Covid infections, the U.S. has averaged 20.6 million barrels per day (bpd) in fuel consumption over the past four weeks, roughly in line with 2019 levels.
John Kilduff, founding partner, Again Capital
The report undercuts the almost uniformly bullish sentiment
The positive outlook was helped along by U.S. president Joe Biden on Wednesday urging the Organization of the Petroleum Exporting Countries (OPEC), to boost oil output, in order to offset rising gasoline prices; his plea is widely regarded as further evidence that crude will be in short supply as the U.S. and Europe ease their coronavirus-induced movement restrictions.
More signs that Delta isn't having the impact predicted in media circles: OPEC in its monthly report released on Thursday maintained its oil demand forecast for this year and 2022: "The global economy continues to recover," it stated, but conceded that "COVID-19-related developments will need close monitoring."
The cartel has calculated that demand will rise by 5.95 million bpd this year, or 6.6 percent, and in 2022 fuel use will expand by 3.28 million bpd.
However, at a time when sentiment almost always triumphs over reason, the International Energy Agency on Thursday cut its global oil consumption forecasts "sharply" for the rest of this year (by 550,000 barrels per day) and predicted a new surplus in 2022.
Toril Bosoni, head of the IEA's oil industry and markets division, told Bloomberg television, "The demand outlook is highly uncertain because of the delta variant: there could be further downside risk due to the virus in the second half," but "there's also upside risk" from pent-up travel demand in the U.S. and Europe.
By contrast, Goldman Sachs sees the variant having only a transient impact on oil demand.
John Kilduff, founding partner at Again Capital, seemed dismayed by the IEA's stance: "The report undercuts the almost uniformly bullish sentiment that has been hitting the market as of late; the surplus we saw in the IEA data was a bit of a shock, and investors are taking note of the potential for future over-supply."