Oil prices were little changed on Friday and Brent was on track to end the week higher after a strong recovery from Monday's steep slide, underpinned by expectations that supply will remain tight through the year.
The price of oil and other riskier assets tumbled at the start of the week on concern over the impact on the economy and crude demand from surging cases of the COVID-19 Delta variant in the United States, Britain, Japan and elsewhere.
Brent crude advanced 31 cents, or 0.4%, to settle at $74.10 after jumping 2.2% on Thursday. U.S. West Texas Intermediate (WTI) crude settled 16 cents, or 0.2%, higher at $72.07 per barrel, having gained 2.3% on Thursday.
U.S. crude futures were set to end the week little changed, having declined in the previous two weeks. Brent is set to gain 0.4% on the week.
"The demand concerns proved to be exaggerated, which is why oil prices have since recovered. Despite the expansion in oil supply, the oil market will remain slightly undersupplied until the end of the year," Commerzbank said in a note.
Both contracts fell about 7% on Monday but have recouped all of those losses, with investors expecting demand to stay strong and the market to receive support from falling oil stockpiles and rising vaccination rates.
Demand growth is expected to outpace supply after Sunday's deal between the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to add back 400,000 barrels per day (bpd) each month from August.
ANZ Research analysts said in a report that the market was starting to sense the 400,000 bpd increase will not be enough to keep the market balanced and inventories in the United States and across OECD countries would continue to fall.
U.S. crude inventories rose by 2.1 million barrels last week, but stocks at the Cushing, Oklahoma delivery point for U.S. crude hit their lowest since January 2020.
"We still think the OPEC+ driven dip in crude and distillate prices is a buying opportunity and project Brent will hit $100/barrel next year, with distillates tagging along for the ride," Bank of America said in a note.