Oil Prices Drop On Warnings Of Slowdown In Demand Recovery

Oil prices slipped on Thursday after the International Energy Agency (IEA) warned that the spread of the Delta variant of the coronavirus would slow the recovery of global oil demand.

Brent crude futures fell from a session high of $71.90 to $70.99 a barrel as of report time. U.S. West Texas Intermediate (WTI) crude futures fell 47 cents to $68.78 a barrel.

The IEA in its monthly report said rising demand for oil pulled back in July and was set to continue receding for the rest of the year after the latest wave of COVID-19 infections prompted countries to bring in restrictions again.

"Growth for the second half of 2021 has been downgraded more sharply, as new COVID-19 restrictions imposed in several major oil-consuming countries, particularly in Asia, look set to reduce mobility and oil use," the Paris-based international energy watchdog said.

"We now estimate that demand fell in July as the rapid spread of the COVID-19 Delta variant undermined deliveries in China, Indonesia and other parts of Asia."

The IEA put the demand slump last month at 120,000 barrels per day (bpd) and predicted growth would be half a million bpd lower in the second half than it had estimated last month, noting some changes were due to revisions in data.

However, the Organization of the Petroleum Exporting Countries (OPEC) in its monthly report that also came out on Thursday stuck to its prediction of a strong recovery in world oil demand in 2021 and 2022, despite concerns about the spread of the virus.

In July, OPEC agreed to boost output each month by 400,000 bpd versus the previous month, starting in August, until the rest of their record cuts of 10 million bpd, about 10% of world demand, made in 2020 are phased out.