Oil futures in New York traded near USD 67 a barrel after advancing more than 8 percent over the previous two sessions. Top crude importer China has brought its latest outbreak under control, but Covid-19 continues to spread across other regions, prompting renewed restrictions on mobility. The dollar also inched higher, making commodities priced in the currency more expensive.

Oil’s red-hot rally over the first half of the year has been interrupted by delta, although banks such as Goldman Sachs Group Inc. and UBS Group AG see prices recovering through the end of 2021 as the market tightens. Investors will be watching for any change to OPEC+ output policy when the group meets Sept. 1.

"Oil’s rebound has been swift and quick," said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. "The recent correction, however, has been one of the steepest this year, highlighting the impact of the delta variant on oil demand."

The outbreak that’s placed Sydney into lockdown for more than two months shows no sign of slowing, with a new daily record of 919 infections in New South Wales. Japan is expected to announce an expansion of its state of emergency to eight more prefectures, while Thailand’s death toll topped 10,000, with more than 8,000 of those coming in the past two months.

The prompt timespread for Brent crude has firmed in a bullish backwardation structure – where near-dated contracts are more expensive than later-dated ones – following some weakness due to the virus resurgence. The spread was 74 cents a barrel, compared with 38 cents on Monday.

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