Oil prices inched higher on Monday as concerns over supply shortages outweighed worries about the global economic recovery and rising COVID-19 cases.
Brent crude futures climbed 21 cents or 0.3% to $72.62 a barrel while US West Texas Intermediate (WTI) crude futures rose 27 cents or 0.4% to $70.52 a barrel.
The demand outlook remains cloudy as COVID-19 cases continue to rise globally with the Delta variant driving surges in many countries. The International Energy Agency (IEA) has trimmed its 2021 oil demand growth forecast by 100000 barrels per day (bpd) to 5.3 million bpd. The IEA warned that resurgent outbreaks in some Asia-Pacific countries including Indonesia Malaysia and Thailand could reduce demand by 300000 bpd in August.
On the other hand supply concerns linger as OPEC+ continues to restrict output despite pressure from the US and other nations to increase production. The group's reluctance to raise production despite a rebound in demand and rising prices comes amid concerns about the spread of the Delta variant which could upend the global economic recovery and affect demand for oil.
Iran's return to the oil market also remains uncertain with talks between Tehran and Western powers over a nuclear deal still ongoing. If a deal is reached the nation could return to exporting oil and add more than 2 million bpd to global supply in the coming months.
Meanwhile inventory data from the US shows declining stockpiles which typically supports higher prices. The American Petroleum Institute reported a drop of 1.16 million barrels in US crude inventories for the week ended July 30 while analysts expected a build of 816000 barrels. The Energy Information Administration (EIA)'s data is due on Wednesday and could provide further clarity on the US supply situation.
The latest price movements come after a volatile week in which Brent and WTI prices both fell by more than 6% amid concerns about the Delta variant and a surprise decision by OPEC+ to increase output in August. The decision was met with criticism from the US and other consumer nations who urged the group to do more to ease supply constraints and lower prices.
