Oil futures: Brent drops $1/b on Delta fears, China flight capacity slumps 10%

3 Aug 2021

Quantum Commodity Intelligence - Crude oil futures tanked again after US markets opened Tuesday, with Brent dropping to a low of $71.05/b before rebounding. 

Front-month October ICE Brent futures were trading at $71.97/barrel (1454 GMT), compared to Monday’s settle of $72.74/b and having closed Friday at $75.41/b.

At the same time, September NYMEX WTI was trading $70.10/b, versus Monday’s settle of $71.29/b.

China is facing its biggest Covid outbreak this year as the Delta-variant takes hold, with cases springing up in more than 20 cities now and restrictions to local movement as well as travel in and out of some major urban centres put in place.

Chinese passenger flight capacity tumbled 9.8% in the week ending 1 August compared with the previous week, OAG data showed, as the country applies a strict zero Covid policy, whereby sweeping lockdowns are enforced as soon as new cases are reported. 

"The oil market continues to alternate between concerns about tight supply on the one hand and about looming demand outages on the other. The pendulum swung back to the demand concerns yesterday," said Commerzbank. 

Markets came under heavy selling pressure Monday following weak manufacturing data from China and the US, while the spread of the Delta Covid variant raised further concerns on travel restrictions.

The seven-day average of daily coronavirus cases in the US surpassed the peak seen last summer when the nation didn’t have an authorized Covid-19 vaccine, CDC Director Dr Rochelle Walensky said Monday, citing data published over the weekend.

Cases breached 72,790 on Friday, higher than the peak in average daily cases seen last summer when the country was reporting about 68,700 new cases per day.

The CDC added 16 destinations to its "very high" Covid-19 risk level on Monday, including Greece, Ireland and the US Virgin Islands.

The Delta variant is also seen stalling economic recovery across the Asia-Pacific region as cases surge.

On Tuesday, South Korea said it has detected its first two cases of the new Delta Plus Covid-19 variant