Oil futures: Brent gains towards the European close, Covid still weighs

10 Aug 2021

Quantum Commodity Intelligence - Crude oil futures in late London trading hours Tuesday were rallying, rebounding from three-week lows in the prior days, although Covid restrictions remain an ongoing concern.

Front-month October ICE Brent futures were trading at $70.94/barrel (1610 GMT), compared to Monday’s settle of $69.04/b.

At the same time, September NYMEX WTI was trading $68.60/b, versus Monday’s settle of $66.48/b.

Prices hit three-week lows on Monday with Brent at $67.60/b on Monday, while WTI reached a low point of $65.15/b.

But the impact of Covid is keeping a lid on prices.

Confidence among German investors has fallen to its lowest level since last year, amid worries that rising COVID-19 infections or a slowdown in China could hurt the recovery.

The ZEW economic research institute said its survey of investors’ economic expectations for Germany fell for the third month running in August.

“A lot of panic on relatively low liquidity saw Brent flat price hit the lows. The selloff, which followed Chinese GDP downgrades this weekend, was spurred by new lockdowns in the world’s second-largest economy,” commented London-based Eagle Commodities Brokers.

Airline capacity has fallen by over 30% in China, while gasoline and diesel demand have also retreated due to mobility restrictions across the country.

Traders have also raised concerns that the US demand recovery may have plateaued for now.

“Investors are also questioning the recovery in the US amid rising case numbers. US air travel has plateaued for almost two months amid ongoing travel restrictions,” said Daniel Hynes, senior commodity strategist at ANZ.

US API stock data is available later Tuesday, followed by EIA government data Wednesday.

A Reuters poll expects a small draw in crude inventories, while the Bloomberg survey calls for a small build. For gasoline, Reuters has a 1.7 million/b draw and the Bloomberg survey a draw of 3.7 million/b.

The Platts survey has US crude stocks down 600,000/b in the week ended Aug 6, and gasoline 2.4 million/b lower.

However, the GasBuddy website, which tracks gasoline demand and retail prices, said weekly US gasoline demand fell 1.5% from the prior week, “a trend that may now continue as the summer driving season begins to slow.”

"The Delta variant is also spreading ever further in the US, which could have an impact on driving activity and gasoline demand," said Commerzbank.