Oil Tumbles 7% For The Week As Covid Fears Fully Consume Trading Sentiment

But one analyst thinks the Delta fears may be overblown: File Image/Pixabay

Despite a steady stream of data and analytical arguments to the contrary, crude traders on Friday were fully consumed by the notion that the spread of the Covid variant will derail global demand recovery; as a result, prices dropped yet again, this time by about 1 percent, contributing to the biggest weekly decline in months.

The triggers for Friday's trading performance included U.S. president Joe Biden remarking that Covid cases will go further up before they come down; Japan considering expanding emergency restrictions to more regions; and China imposing curbs in some cities.

Brent  settled down 59 cents, or 0.8 percent, at $70.70, while West Texas Intermediate fell 81 cents, or 1.2 percent, to settle at $68.28 per barrel; for the week, Brent dropped more than 6 percent, its largest week of losses in four months, and WTI tumbled nearly 7 percent, its biggest weekly decline in nine months.

Not helping matters was a rise in the U.S. dollar, ironically as a result of a better-than-expected jobs report.

In Asia, imports for July were assessed at 21.77 million barrels per day (bpd) by Refinitiv Oil Research, a 10-month low; much of this was caused by China with July’s arrivals estimated at 9.21 million bpd, a seven-month low.

India also saw a soft July according to Refinitiv, with imports dropping to 3.41 million bpd; however, South Korea's imports were assessed  at 2.67 million bpd, up slightly from June, making the country likely to pass Japan as the region’s third-biggest crude importer this year.

Reuters noted, "The slow vaccination rollouts in many of Asia’s countries are incompatible with the full re-opening of the region’s economies any time soon, meaning crude demand could be muted for several months to come."

Still, vehicle miles travelled on U.S. highways in the week to August 1 match the same week in 2019,  according to the Department of Transportation; and gasoline deliveries to Spain jumped above pre-pandemic levels last month.

This compelled Daniel Hynes, senior commodities strategist at Australia and New Zealand Banking Group Ltd., to call for reasoned thinking: "When you take a step back, restrictions are still being eased back across most regions, demand seems to be holding up, and I think the impact on this latest wave should be significantly less than previous ones."