Oil futures declined on Friday, but the U.S. benchmark maintained a small weekly gain, as investors worried about the spread of the delta variant of the coronavirus that causes COVID-19, and its effect on crude demand.

In the short-term, “the crude oil market is back in an uptrend but it is in a bit of a no-mans-land and it could take a few days to gather steam for another run,” said Phil Flynn, senior market analyst at The Price Futures Group, in a note. “If COVID concerns ease a bit, then reports of falling global oil inventories should ignite another rally.”

West Texas Intermediate crude for September delivery


fell 65 cents, or 0.9%, to settle at $68.44 a barrel on the New York Mercantile Exchange, leaving it with a weekly gain of 0.2%, according to Dow Jones Market Data. Prices in electronic trading Friday afternoon extended their decline to trade around $67.95 about a half hour after the Nymex settlement.

October Brent crude

the global benchmark, lost 72 cents, or 1%, to settle at $70.59 a barrel on ICE Futures Europe, for a weekly decline of 0.2%.

Crude lost ground Thursday after the International Energy Agency, in its monthly report, lowered its forecast for 2021 oil-demand growth, while increasing its 2022 outlook. The Organization of the Petroleum Exporting Countries left its demand outlook unchanged in its monthly report, also released Thursday, while raising its non-OPEC supply forecast.

The upshot is that the IEA and OPEC both “envisage [a] significantly oversupplied oil market next year,” said Carsten Fritsch, analyst at Commerzbank, in a note.

“The IEA and OPEC forecasts for next year make one thing clear: OPEC+ has no scope whatsoever to further increase its oil production next year if it doesn’t want to risk another oversupply and inventory build,” he said.

He noted that the IEA showed oil stocks in industrialized countries in June were 66 million barrels below the pre-pandemic five-year average. “As the oil market will be virtually balanced for the remainder of the year, destocking is probably more or less complete and stocks should have bottomed out,” Fritsch said.

Still, data released Friday suggest that a U.S. production increase is on tap. Baker Hughes

said the number of active domestic oil rigs was up by 10 at 397 this week, marking the largest weekly rise since the 13-rig increase reported on April 1.

On Wednesday, the White House said it would press OPEC+ to raise output to ensure stable energy supplies.

“The U.S. government’s request that OPEC increase oil supply was an indication that oil demand is alive and well,” Darren Schuringa, chief executive officer of ASYMmetric ETFs, an exchange-traded fund issue and investment adviser, told MarketWatch. “This is contrary to the current narrative about a slowdown in oil demand.”

Among the petroleum products traded on Nymex Friday, September gasoline

shed 0.6% to $2.26 a gallon, up nearly 0.3% from a week ago, while September heating oil

lost 1.2% to $2.08 a gallon, down 0.3% for the week.

Natural-gas futures saw its September contract

fall 1.8% at $3.86 per million British thermal units, to post a weekly decline of 6.7%. Natural gas jumped to its highest since December 2018 earlier this month, due in part to hotter-than-normal weather in North America, as well as strong global demand.

“Weather is now trending closer to normal and additional cooling degree day accumulation in the latter half of the near- term forecast appears more limited,” said Christopher Louney, analyst at RBC Capital Markets, in a note.

While that’s helped bring gas prices below $4 per million BTUs, “balances are still tight, demand is high, a production response is still lacking, and global demand for natural gas continues to impress,” he said.

Traders eyed the path of a tropical depression in the Atlantic, named Fred, which was expected to move near the west coast of the Florida peninsula Saturday night and Sunday, according to the U.S. National Hurricane Center.

“The storm may cause temporary shut-ins for some offshore production, which would reduce supply for a couple of days,” said Christin Redmond, global commodity analyst at Schneider Electric, in a note. On the demand side, the storm is likely to bring cooler temperatures, which may reduce power generation demand, she said.

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