Oil dropped after the biggest three-day gain since March, with the latest Covid-19 resurgence still clouding the outlook for fuel demand.
Futures in New York fell below $68 a barrel after rising almost 10 percent over the past three sessions. Shrinking US stockpiles, a rebound in Indian demand and China’s containment of its latest outbreak are providing some positive signs for the market, but restrictions on mobility still remain in place in many regions due to the fast-spreading delta variant of the coronavirus.
Oil has been volatile this month, clawing back some losses this week after the worst streak of declines since October 2019.
The European Union will discuss today (Thursday) whether to reimpose curbs on US visitors as cases spike, while the market will be looking for any changes to production policy from the OPEC+ alliance when the group gathers on September 1.
“The persistent spread of the delta variant is weighing on transport fuel demand, particularly in Asia-Pacific markets where vaccination rates are low,” said Victor Shum, vice president of energy consulting for IHS Markit in Singapore. “The oil price rally this week cannot be sustained.”
Investors will also be keenly watching the Jackson Hole meeting from Thursday for insights on how the Federal Reserve will ease stimulus. The dollar edged higher, making raw materials such as oil more expensive for investors.
Prices:
- West Texas Intermediate for October delivery lost 0.8 percent to $67.82 a barrel on the New York Mercantile Exchange at 10:23am in Singapore after rising 1.2 percent on Wednesday.
- Brent for October settlement fell 0.7 percent to $71.77 on the ICE Futures Europe exchange after gaining 1.7 percent on Wednesday.
The prompt timespread for Brent 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 97 cents a barrel, compared with 38 cents on Monday.
US crude stockpiles fell by 2.98 million barrels last week, according to Energy Information Administration data. Gasoline inventories slid by 2.24m barrels, compared with the median estimate in a Bloomberg survey for a 1.5m barrel decline. Cushing supplies rose marginally.
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