(Bloomberg) — Oil declined amid expectations of an upcoming supply increase from OPEC+ producers at a time when the delta variant is spreading worldwide and threatening a demand rebound.

Futures in New York fell as much as 1.5% on Monday. The Organization of Petroleum Exporting Countries and its allies will meet Thursday, when they may decide to boost output by 550,000 barrels a day in August, a Bloomberg survey shows. Meanwhile, the spread of the delta variant is resulting in renewed lockdowns across parts of Asia and Australia. The variant accounts for nearly all new positive cases in the U.K. and is increasing in prevalence elsewhere in Europe.

With the spread of the variant, “we believe OPEC+ should take an even more cautious approach, only raising production by 100,000 to 200,000 barrels per day, month-on-month in August,” said Louise Dickson, oil markets analyst at Rystad Energy, in a note.

U.S. crude futures are still up more than 10% so far this month with progress in Covid-19 vaccination campaigns and reopenings underpinning a global demand recovery. Whether it’s in the North Sea, the Cushing storage hub in Oklahoma, or the Middle East, futures and swaps in the world’s leading pricing locations are trading deep in a pattern called backwardation, showing how traders are willing to pay big premiums to secure physical barrels.

Saudi Arabia has maintained discipline toward relinquishing supply back into the market, while producers like Russia have considered backing an increase. The 23-nation alliance has restored roughly 40% of the almost 10 million barrels of daily production it shuttered when demand collapsed last year.

In a possible complication to talks on an Iranian nuclear deal, U.S. forces conducted air strikes Sunday against Iran-backed militias blamed for attacking American facilities in Iraq, the Defense Department said.

“With virus uncertainties due to the highly contagious Delta strain and questions about an Iran nuclear deal hanging over the market, the group may opt for caution,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.

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Still, the oil market’s structure continues to indicate tighter supply. Brent futures for August are 76 cents more expensive than those for September, a bullish structure known as backwardation. The spread was 40 cents at the beginning of this month.

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