- Oil reversed earlier losses as sentiment improved in key markets, even though the spread of the delta coronavirus variant, including in the broader market of China, continues to pose a risk to demand.
West Texas Intermediate futures rose 0.9% after slumping to the most in two weeks on Monday. Equities in Europe increased on Tuesday with positive earnings reports helping to offset concerns over the virus.
Covid - 19 is forcing governments to reimpose or extend curbs, with residents in Beijing advised not to leave the capital as flights are being cancelled. Some cities and towns have been sealed by local authorities.
Crude rallied strongly in the first half of the year as vaccines allowed major economies to reopen, boosting oil demand and draining the glut built up during the initial wave of pandemic. The pace of gains slowed in July as Delta began to pose a greater challenge, while the Organization of Petroleum Exporting Countries pushed further with revoking more output.
Today, the sentiment in stock markets are also positive, said ABN Amro Bank senior oil economist Hans van Cleef. After Monday's price drop, 'the bulls see this as a buying momentum. But the fears of the delta variant affecting future oil demand continues to cap the upside.
Some of the strictest virus defenses have been breached in China, yet delta has not allowed them to exist. Authorities reported 61 confirmed cases and 23 asymptomatic infections on Tuesday. Thailand reported almost 19,000 infections and in Indonesia, the biggest gasoline importer in Asia, restrictions have been extended to some regions until Aug. 9.
The increase in case could be taking toll on oil consumption worldwide, slowing down a rebound from earlier this year.
'We are seeing likely a very slight muting of demand globally, but I'm talking about a slight muting of demand at this time, BP plc CEO Bernard Looney said.