Oil prices remain stable as IEA warns of a slowing in demand recovery

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The development of the Delta version of the coronavirus, according to the International Energy Agency (IEA), will hinder the global oil demand recovery. After sliding to a session low of $71.19, Brent crude futures rebounded 18 cents, or 0.25 percent, to $71.62 per barrel by 0848 GMT.WTI crude futures in the United States climbed 9 cents, or 0.13 percent, to $69.34.

Following the latest wave of COVID infections, which prompted governments to reintroduce restrictions, the worldwide energy watchdog said in its monthly report that surging demand for oil reversed direction in July and was projected to slow for the rest of the year. “Growth for the second half of 2021 has been downgraded more sharply, as new COVID-19 restrictions imposed in several major oil-consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the Paris-based IEA said.

“We now estimate that demand fell in July as the rapid spread of the COVID-19 Delta variant undermined deliveries in China, Indonesia, and other parts of Asia.”

Last month, the IEA estimated a demand dip of 120,000 barrels per day (bpd) and forecast that growth in the second half of the year would be half a million bpd lower than in the first half, with some modifications due to data revisions. That occurred a day after the US pushed OPEC and its partners, known as OPEC+, to increase oil supply in order to combat rising gasoline prices, which the US sees as a danger to global economic recovery. Beginning in August, OPEC agreed in July to increase output by 400,000 barrels per day (bpd) above the previous month until the remainder of their record cuts of 10 million bpd, or nearly 10% of global demand, made in 2020 are phased out.

“The Biden Administration said that the recently agreed production increases will not fully offset previous production cuts imposed during the pandemic,” ANZ said in a note.