(C) Reuters. FILE PHOTO: An employee demonstrates a sample of crude oil in the Yarakta Oil Field, owned by Irkutsk Oil Company (INK), in Irkutsk Region, Russia in this picture illustration taken March 11, 2019. REUTERS/Vasily Fedosenko/Illustration/File Photo
By Noah Browning
NEW YORK (Reuters) -Oil prices slipped about 1% on Monday over concerns about spreading COVID-19 variants derailing the global economic recovery that has brought fuel demand to near pre-pandemic levels.
Brent crude for September fell 63 cents, or 0.8%, to $74.92 a barrel by 1:55 p.m. EDT (1755 GMT). U.S. West Texas Intermediate crude for August was at $73.78 a barrel, down 78 cents, or 1.1%.
Both benchmarks fell about 1% last week, stalling out a rally that had brought both U.S. crude and Brent to levels not seen since October 2018.
Tokyo reimposed lockdowns due to concerns over coronavirus infections, less than two weeks before the city hosts the Summer Olympic Games.
“It has raised hackles in the market about demand recovery again,” said John Kilduff, a partner at Again Capital in New York. “Asia is obviously essential. It’s a swing demand center, and this is a huge setback.”
The spread of new variants and unequal access to vaccines threaten the global economic recovery, finance chiefs of the G20 large economies said over the weekend. The remarks weighed on the oil demand outlook.
“Traders are now refocusing on the spread of the COVID-19 pandemic and global concerns over the new variants’ expansion,” Rystad Energy analyst Louise Dickson said.
The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, abandoned talks last week that would have raised output, after a dispute between Saudi Arabia and the United Arab Emirates about how to extend the pact.
Analysts say the collapse of talks raises the longer term prospect of producers abandoning the deal and pumping at will. That concern fed trader fears last week, leading to a bout of selling that has not quite abated.
“The longer the standoff … the greater the possibility of some sustained price weakness,” said Jim Ritterbusch of Ritterbusch and Associates in Houston.
Saudi Arabia and Oman called for continued cooperation between OPEC and allied producers.
Meanwhile, oil stockpiles in the biggest crude producing nation continued to tighten, with U.S. inventories falling to the lowest since February 2020 in the week to July 2. [EIA/S]
Oil prices slip 1% as economic fears offset tightening crude supplies
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