However, Goldman Sachs lowers its demand forecast for China: File Image/Pixabay
Continued U.S. crude drawdowns plus another bullish demand outlook were enough on Wednesday to positively influence investors obsessed with Covid infection reports, and as a result oil prices eked out a second round of gains.
After it was learned from the American Petroleum Institute that crude stocks fell by 816,00 barrels and gasoline stocks fell by 1.1 million barrels in the week ended August 6, West Texas Intermediate settled 1.36 percent higher at $69.25 per barrel, adding to Tuesday's 2.7 percent jump.
Brent crawled up 3 cents to $70.66 per barrel, following Tuesday's 2.3 percent gain.
Vivek Dhar, commodity analyst, Commonwealth Bank
A tightening oil market outlook will likely amplify oil price gains
Oil was also supported by the U.S. Energy Information Administration stating that fuel consumption in May through July was higher than expected; the EIA's latest monthly report showed the need for supply from the Organization of the Petroleum Exporting Countries (OPEC) will exceed OPEC supply by 1 million barrels per day (bpd) in the third quarter and by 300,000 bpd in the fourth quarter of 2021.
Vivek Dhar, commodity analyst at Commonwealth Bank, noted that "With OECD commercial crude oil stockpiles having dropped back to pre-COVID levels already, a tightening oil market outlook will likely amplify oil price gains."
Indeed, the White House on Wednesday stated that OPEC's decision to gradually ease production cuts is "simply not enough" during a "critical moment in the global recovery," and the Joe Biden administration is expected to call on the cartel to boost production in order to combat climbing gasprices.
For his part, Andrew Sheets, chief cross-asset strategist at Morgan Stanley, told Bloomberg on Wednesday that he favours oil over metals in commodities: "We know the oil price might be a little bit range bound, but we think the fundamentals there are better than on the metal side."
But investors continue to suffer the Covid Delta variant blues, thanks to institutions such as Goldman Sachs lowering its oil demand forecast for China for the next two months, citing concerns over the impact of the next wave of coronavirus infections.
However, the bank conceded that Delta's impact would be moderate; thus, the forecast dropped minimally, to 97.8 million bpd from 98.4 million bpd calculated in July.
It's worth noting that the media's obsession with rising Covid infection rates fails to take into account the virus's true impact, if the UK is any example: although caseloads are ticking higher after almost all public-health restrictions were lifted in mid July in that country, hospital admissions have been falling and deaths are a fraction of the level seen in earlier phases of the pandemic.