From Poland to Brazil, motorists seem unconcerned about the Covid Delta variant: File Image/Pixabay
Following news that Saudi Arabia slashed prices of all crude grades to customers in Asia, oil prices on Monday experienced yet another decline, exacerbated by fallout from the U.S. September payrolls report, which showed a much smaller increase in jobs than expected.
Brent fell 84 cents to $71.77 per barrel, while West Texas Intermediate lost 78 cents to $68.51.
Jonathan Millar, an economist at Barclay's, noted that "Employment decelerated sharply in August, with little indication of a pickup in labour supply; this puts the Fed in a quandary as it balances risks of a sharp demand slowdown against those of tight supply and inflation."
Hedi Grati, executive director, IHS Markit
August 2021 would be the best month of August since 2011
Still, the weak jobs growth numbers were said to spur overall optimism and increase risk appetite, as the Federal Reserve may not rush to taper its Covid stimulus initiatives (the unofficial word is the tapering will begin in December instead of this month).
As for the Saudis' surprise move to cut the price of its flagship crude for October by more than double the expected amount, it was attributed to factors including increased competition and a desire to retain market share.
But Warren Patterson, head of commodities strategy at ING Groep, pointed out that "The level of cuts in Saudi OSPs [official selling prices] for Asia....does not send a great signal to the market regarding current demand dynamics."
Ironically, there is scant evidence to support the persistent fear within the analytical community that such initiatives in a Covid plagued world will have any negative impact on demand, which by all counts is surging - and not just in the U.S.: Hedi Grati, an executive director at IHS Markit, said on Monday of the firm's estimate for gasoline demand in Europe, "August 2021 would be the best month of August since 2011; the ten years in between were all lower."
Bloomberg reported that the demand boost "appears to be filtering into the wider market, with traders reporting strong demand from local refineries for crude"; this was supported by Atlantia, which disclosed that toll-road usage in Spain was up 10 percent (the strongest week since the pandemic began), Italy highways were almost 3 percent busier than 2019, Poland's roads were more congested than two years ago, and France's highway traffic climbed by more than 6 percent above 2019 levels in July.
In South America, demand in Brazil is also above 2019 levels, according to data.
With regard to air traffic still 30 percent below 2019 levels and diesel type fuel about 4 percent below, Giovanni Staunovo, commodity analyst at UBS Group, said, "Pent-up demand to some extent is helping, but also lifting of restrictions earlier this year and no additional measures despite rising cases."