Oil prices rise but demand concerns likely to lead to big weekly fall

Oil prices rose on Friday but remained on track for their biggest weekly decline since March over concerns about the effect on fuel demand from travel restrictions imposed to curb the spread of the Delta variant of Covid-19.

Brent crude oil futures were up 95 cents at $72.24 a barrel by 3.35pm UAE time and US West Texas Intermediate (WTI) crude futures rose 92 cents to $70.01, although both contracts have given up more than 5 per cent this week.

"The price action we see now is really a function of the macro picture," said Howie Lee, an economist at Singapore bank OCBC. "The Delta variant is now really starting to hit home and you see risk aversion in many markets, not just oil."

Japan is poised to expand emergency restrictions to more prefectures while China, the world's second largest oil consumer, has imposed curbs in some cities and cancelled flights.

"At least 46 cities have advised against travelling and authorities have suspended flights and stopped public transport. This could impact oil demand as it comes towards the end of the summer travel season," ANZ said in a report.

Daily new Covid-19 cases in the United States, meanwhile, climbed to a six-month high, while oil prices gained support from increased tension between Israel and Iran.

"Opec+ supply hikes should still leave the market in deficit in 2021," Bank of America analysts said.