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Oil futures were modestly higher Tuesday, consolidating after a dive in the previous session blamed on worries about the impact on demand from the spread of the delta variant of the coronavirus that causes COVID-19.
West Texas Intermediate crude for September delivery
CL00,
CLU21,
rose 32 cents, or 0.4%, to $71.58 a barrel on the New York Mercantile Exchange. October Brent crude
BRN00,
BRNV21,
the global benchmark, was up 37 cents, or 0.5%, at $73.26 a barrel on ICE Futures Europe. Both benchmarks fell more than 3% Monday.
The 2021 oil rally, which has seen WTI and Brent both rise around 48% year-to-date, has been driven by the resumption of economic growth as businesses have reopened and consumer demand for gasoline has risen especially in countries with successful coronavirus vaccination rollouts, said Tom Essaye, founder of Sevens Report, in a note.
Ongoing continued production discipline among members of the Organization of the Petroleum Exporting Countries and their allies, or OPEC+ has also helped, Essaye said.
“While the latter will likely remain intact in the months and quarters ahead, the former is coming more into question given the delta variant’s potential impact
on virus countermeasures as well as uncertain economic trends,” he wrote.
If the demand pillar of the oil rally begins to crumble, year-to-date gains won’t be sustainable, he said.
“Looking ahead, we remain neutral on oil right now as the market looks for further insight to the current fundamentals,” Essaye said. “That will likely leave WTI pinned between support at $66 and resistance at $77/barrel.”
