Oil rises but still set for weekly loss on demand worries

[August 06, 2021]  By Dmitry Zhdannikov

LONDON (Reuters) -Oil prices rose on Friday but remained on track for their biggest weekly decline since March on concerns over the impact on fuel demand from travel restrictions to curb the spread of the Delta variant of COVID-19.

A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011. REUTERS/Jo Yong-Hak

Brent crude oil futures were up 95 cents at $72.24 a barrel by 1135 GMT and U.S. West Texas Intermediate (WTI) crude futures rose 92 cents to $70.01, though both contracts have given up more than 5% this week.

"The price action we see now is really a function of the macro picture," said Howie Lee, an economist at Singapore bank OCBC. "The Delta variant is now really starting to hit home and you see risk aversion in many markets, not just oil."

Japan is poised to expand emergency restrictions to more prefectures while China, the world's second-largest oil consumer, has imposed curbs in some cities and cancelled flights.

"At least 46 cities have advised against travelling and authorities have suspended flights and stopped public transport. This could impact oil demand as it comes towards the end of the summer travel season," ANZ said in a report.

Daily new COVID-19 cases in the United States have climbed to a six-month high.

However, oil prices gained support from rising tensions between Israel and Iran.

"OPEC+ supply hikes should still leave the market in deficit in 2021," Bank of America analysts said.

(Reporting by Dmitry Zhdannikov, Naveen Thukral and Florence TanEditing by David Goodman)

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