IEA warns of slowing oil demand as Delta variant surges worldwide

Oil prices fell for a second day today after the IEA warned that demand growth for crude products had slowed sharply due to surging cases of the Delta variant of COVID-19 around the world.

Brent crude fell 31 cents, or 0.4%, to US$71.00 a barrel by 0046 GMT, after dropping 13 cents in the previous session, while US crude shed 33 cents, or 0.5%, to $68.76 a barrel, having fallen 0.2% on Thursday.

The International Energy Agency (IEA) said that increasing demand for crude ground to a halt in July and is set to rise at a slower pace over the rest of 2021, as governments move to reimpose restrictions to quell the spread of the Delta variant.

“Growth for the second half of 2021 has been downgraded more sharply, as new COVID-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the IEA said.

In contrast, OPEC held to its forecasts for a rebound in oil demand globally this year in its latest monthly report, released on Thursday. The oil cartel also pointed to further growth in 2022, notwithstanding the rising concerns about the surge in COVID-19 cases.

“Although OPEC left its demand forecast unchanged, we think that the near-term demand outlook has deteriorated, which may mean that the group adjusts down its supply plans at its next meeting,” said Caroline Bain, chief commodities economist at Capital Economics.