Brent Oil Steadies Near 8-Week Low After Market Selloff on Delta

© Reuters. Brent Oil Steadies Near 8-Week Low After Market Selloff on Delta

(Bloomberg) -- Brent oil was steady after tumbling to an eight-week low amid a broader market rout stoked by a Covid-19 resurgence, which has raised concerns about the short-term outlook for energy demand.

Futures in London traded near $69 a barrel after plunging 6.8% on Monday, the most since March. The fast-spreading delta variant has led to a surge in virus cases and renewed restrictions as it sweeps across the globe from Asia to Europe. A stronger dollar has also weighed on crude, making raw materials priced in the U.S. currency less attractive to investors.

Oil has run into stiff headwinds in July after rising in seven of the past eight months as the global economy rebounded from the pandemic. The salvaged OPEC+ deal has removed a layer of uncertainty for the market, but the latest Covid-19 resurgence is a reminder that the recovery will be bumpy.

The U.S. warned citizens to not travel to the U.K. and Indonesia amid a rise in infections in the two nations. Southeast Asia’s largest economy has surpassed India in new daily cases, cementing its position as Asia’s new virus epicenter, while several of its neighbors are also seeing a surge in cases.

The prompt timespread for Brent was 57 cents a barrel in backwardation -- where near-dated contracts are more expensive than later-dated ones. That compares with 78 cents a week earlier.

See also: Oil’s Hired Hands Return for Biggest Recovery in 7 Years: Chart

While oil has run into some turbulence, there are expectations that the market will tighten further and prices will once again rally. OPEC+ has agreed to keep gradually reviving output shuttered during the pandemic, but market watchers warn the increases aren’t enough to fill the looming supply shortfall.

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