Oil extends losses in volatile trade as Delta variant angst spreads

Oil extended its losses on Tuesday in volatile trade as concern over rising cases of the Delta coronavirus variant weighed on prices, sapping an earlier rally built on expectations for U.S. inventories to fall. Brent crude oil futures fell 32 cents, or 0.45%, to $72.57 a barrel. U.S. West Texas Intermediate crude was down 55 cents, or 0.8%, at $70.70 a barrel. Concerns over the spread of Delta variant in the United States and China, the top oil consumers, weighed on prices, with both benchmarks falling more than 3% on Monday. In China, the spread of the variant from the coast to inland cities has prompted authorities to impose strict measures to bring the outbreak under control.

“The news flow out of China has been bearish since the weekend,” said John Kilduff, a partner at Again Capital Management in New York. “There continues to be angst about the COVID-19 situation, which weighs on the petroleum complex the most.” Both Brent and U.S. crude had risen more than 60 cents earlier in the session. Despite recent fluctuations, Brent has risen more than 40% this year, helping earnings of oil firms. “We’re trying to price in how big the slowdown is going to be with the Delta variant,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. BP, ConocoPhillips, Diamondback Energy Inc and Continental Resources Inc all reported strong second-quarter earnings this week. Expectations of a return of Iranian crude to the markets also had a negative impact. Iran and six powers have been in talks since April to revive a nuclear pact that could release its oil exports. But Iranian and Western officials have said significant gaps remain.

Iran’s new president, Ebrahim Raisi, said on Tuesday his government would take steps to lift “tyrannical” sanctions imposed by the United States on its energy and banking sectors. The sixth round of indirect talks between Tehran and Washington adjourned on June 20, two days after Raisi was elected president. Parties involved in the negotiations have yet to announce when the talks will resume. Meanwhile, a preliminary Reuters poll showed U.S. crude and product inventories likely declined last week, with both distillates and gasoline stockpiles predicted to have fallen for a third straight week.