Oil prices rose on Friday, pulling up from three-month lows, but they were still on track for a weekly loss of over 5% as new lockdowns in countries facing surging cases of the Delta variant dampened the outlook for fuel demand.
The broader investor risk aversion also weighed on oil with the U.S. dollar moving to a nine-month high on signs the U.S. Federal ReserveU.S. Federal Reserve is considering demonetizing stimulus this year?
West Texas Intermediate futures for September, due to expire on Friday, rose 40 cents or 0.6% to $64.09 a barrel at 0458 GMT, after sliding 2.7% on Thursday. The more active October contract rose 39 cents or 0.6% to 69.893 dollars per barrel.
Brent crude futures rose 32 cents or 0.5% to $66.77 a barrel, after dropping 2.6% on Thursday to its lowest close since May.
The spread of Delta variant in Asia is likely to dampen demand for crude oil and cloud the outlook for oil prices, DailyFX strategist Margaret Yang said, adding mounting concerns over global growth were weighing on the oil market.
I ratified the emergency lockdown and extended cases are on the rise in countries such as South Korea, Malaysia, Philippines, Vietnam and Thailand whose industries need oil, which will also be affected by the Delta variant, Yang said.
China has imposed zero tolerance with its coronavirus policy, affecting shipping and global supply chains, and the United States and China have imposed new flight capacity restrictions.
Meanwhile, Delta variant outbreaks in Australia and New Zealand have sparked strict lockdowns.
The approaching end of the U.S. summer peak gasoline demand season and ending of summer holidays in Europe and the United States are also projected to affect oil demand.
The current automotive component remains the weakest component of global demand, and the risk of additional restrictions on domestic and international travel due to the Delta variant will be a key variable for oil over the rest of H 2, particularly as the U.S. driving season ends, said Stephen Innes, managing partner of SPI Asset Management.