Oil futures remained under pressure Thursday as an OPEC stalemate stokes uncertainty over the outlook for crude supply.

The tone wasn’t helped by a global equity market selloff and a continued rally in U.S. Treasurys that analysts said may reflect uncertainty over the pace of the economic recovery and worries over the spread of the delta variant of the coronavirus that causes COVID-19. Expectations for another drop in U.S. crude inventories, however, were helping to limit downside.

“Market participants seem to be pricing in the risk of a ‘pump at will’ endgame from OPEC as the fallout between Saudi Arabia and the [United Arab Emirates] continues, with the latest bouts of risk aversion adding fuel to the retreat,” said Marios Hadjikyriacos, senior investment analyst at XM, in a note.

West Texas Intermediate crude for August delivery
CL00,
-0.64%

CLQ21,
-0.64%

fell 68 cents, or 0.9%, to $71.52 a barrel on the New York Mercantile Exchange. September Brent crude
BRN00,
-0.54%

BRNU21,
-0.54%

was off 58 cents, or 0.8%, at $72.85 a barrel.

Read: What the OPEC standoff means for oil prices and financial markets

Oil trading has been volatile after talks by the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — collapsed on Monday, derailing a proposal to ease existing output curbs in a controlled manner and allow production to rise by 400,000 barrels a day each month from August through December. The U.A.E. has blocked a deal, insisting that it should be allowed to raise the amount of crude it pumps under the initial agreement on production cuts.

In One Chart: OPEC oil stalemate — here’s why U.A.E. is blocking a deal

Meanwhile, oil may also be caught up in a global bout of investor aversion to risky assets. Stock-index futures indicated U.S. equities would join a global equity selloff as investors appeared to take a step back from bets on an accelerating economic recovery and rising inflation.

Analysts said concerns over the delta variant were also weighing on sentiment. Japan on Thursday was set to place Tokyo under a state of emergency that would continue through the Olympics, underlining fears a COVID-19 surge will multiply during the Games.

But downside may be limited after an industry trade group late Wednesday said U.S. crude inventories fell sharply last week.

The American Petroleum Institute said U.S. inventories of crude oil fell by 7.98 million barrels last week, according to sources. Gasoline inventories were seen down by 2.74 million barrels, while distillate supplies rose by 1.09 million barrels. Supplies of crude at Cushing, Oklahoma, the delivery hub for New York Mercantile Exchange oil futures were up 152,000 barrels.

The Energy Information Administration will release official inventories data on Thursday morning. Analysts surveyed by S&P Global Platts expect the EIA data to show crude inventories down 6.2 million barrels; gasoline, down 1.7 million barrels; and distillates, up 1.4 million barrels. 

August gasoline futures
RBQ21,
-0.51%

were down 0.7% at $2.1911 a gallon, while August heating oil was off 1% at $2.0683 a gallon.

August natural gas
NGQ21,
-1.06%

fell 0.6% to $3.573 per million British thermal units.

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