NEW YORK (BLOOMBERG) - Oil prices were steady on Tuesday (Aug 24) after jumping more than 5 per cent amid a broader market rally, with Covid-19 continuing to hang over the market.
Futures in New York traded near US$66 a barrel after surging for the first time in eight sessions on Monday, snapping the worst losing streak since October 2019.
While China has rapidly brought local coronavirus cases down to zero following its latest outbreak, the fast-spreading Delta variant continues to sweep through other regions, prompting renewed restrictions on mobility.
The virus resurgence has interrupted oil's rally and may prompt Opec+ to reassess its plan to return additional barrels each month until all of its halted output halted is revived. The group, which includes the Organisation of Petroleum Exporting Countries and its allies, is scheduled to meet on Sept 1.
Goldman Sachs, however, reiterated that the impact on demand caused by the Delta variant would be transient and that prices should push higher.
"The market is taking some comfort in the fact that it appears as though China has brought the latest Covid-19 outbreak under control," said Singapore-based Mr Warren Patterson, the head of commodities strategy at ING Groep. "This should help to ease worries over demand."
Later this week, investors will also be looking towards the Jackson Hole symposium - being held virtually from Thursday - which may offer insights into how the United States Federal Reserve plans to scale back stimulus.
The futures curve has weakened amid the flare-up. The prompt time spread for Brent was 42 US cents in backwardation - a bullish structure where near-dated contracts are more expensive than later-dated ones. That compares with 92 US cents at the end of July.
Chinese airlines plan to operate the fewest flights in August since February, according to data from Cirium, following the latest virus outbreak.
In Malaysia, infections are rising and threatening to aggravate shortages of semiconductors and other components that have hammered automakers for months.