Americas News
Oil Dips On Delta fears, But Miller Tabak Contemplates Huge Rally Ahead
Even though rising infections due to Delta have been widely acknowledged as transitory, the corresponding return of government Covid restrictions in some countries rekindled investor concerns on Thursday, and as a result oil prices declined for the first time in four days, albeit minimally.
Edward Moya, senior market analyst at OANDA, explained the sentiment in the wake of U.S. crude inventories falling again last week and fuel demand increasing to the most since March 2020: "The headline draw was welcome news, but a steep drop in crude exports and lacklustre jet fuel demand prevented prices from extending gains."
For the record, the Energy Information Administration, which reported the impressive 3 million barrel oil stock draw of last week, also reported distillate stockpiles including diesel and jet fuel rose gaining 0.6 million barrels to 138.46 million barrels, against expectations for a 0.3 million-barrel drop.
Brent on Thursday was down 45 cents at $71.80 per barrel by 0222 GMT, while West Texas Intermediate was down 55 cents at $67.81 per barrel.
Still, analysts remain cautiously optimistic that the current infection situation that has inspired sensational news headlines will soon resolve to the positive: Eurasia Group said in a note on Thursday that "Given the risks around the Delta variant of the coronavirus, but also the accelerating vaccine programs, it's possible the second half of the year also sees a bit of a stop-and-go development before things (hopefully) normalize in 2022."
Even more optimistic was Matt Maley, chief market strategist at Miller Tabak: he said oil's shorter-term moving average is crossing above its longer-term moving average - a strong signal of further upside.
He added, "That's only happened three times since the beginning of this century and each of those three times has been followed by a very strong further rally in crude oil, anywhere from 20-50 percent."
Meanwhile, a possible influence on crude trading over the next few days is a potentially devastating storm brewing in the Caribbean Sea and expected to soon rush through the Gulf of Mexico's oil producing region: BHP on Thursday said it is preparing to evacuate staff from its Shenzi production platform in the region.
Chevron, Equinor and Royal Dutch Shell have also begun removing workers from their offshore facilities.
