Oil prices recover losses as market remains tight

Opec+, led by Saudi Arabia and Russia, has extended its agreement until December 2022

An oil tanker is docked while oil is pumped into it at the ships terminal of PDVSA's Jose Antonio Anzoategui industrial complex in the state of Anzoategui. Crude benchmarks are likely to close the weeShow more

Oil prices recovered their losses from a selloff earlier in the week sparked by the Covid-19 delta variant that was offset by strong demand and tight crude supplies.

Brent, the international benchmark under which two thirds of oil trades, closed the week up nearly 0.42 per cent to $74.10 per barrel. West Texas Intermediate, which tracks US grades, gained 0.22 per cent to close at $72.07 per barrel.

Oil prices have gained about 50 per cent since the start of the year as countries press on with vaccination programmes and major economies reopen.

"Both contracts have now recouped all of their losses for the week. The price action has left Asian markets somewhat bemused, with all thoughts of bargain hunting consigned to the rubbish bin," said Jeffrey Halley, senior market analyst, Asia Pacific at Oanda.

"Both Brent and WTI are now effectively unchanged for the week, and on that basis, I believe the best of the rallies are over for now in the short term," said Mr Halley.

During the first trading session on Monday, the benchmarks plummeted about 7.5 per cent following as market reacted to the decision by Opec+ to bring more supply back into the markets and concerns over the spread of the Covid-19 delta variant.

On Sunday, Opec+, led by Saudi Arabia and Russia, extended its agreement until the end of December 2022. The group reached a consensus over the phasing out of 5.8 million bpd of withheld supply following weeks of deadlock and will review the pact at the end of the year.

Oil prices quickly recovered from the fall, and have since clawed back their losses amid indications of higher demand during the second half of the year.