Oil Down On Delta Concerns Despite Massive U.S. Crude Drawdowns

Global demand seems resilient to Covid infection rises: File Image/Pixabay

Despite more evidence that demand remains untarnished despite the rise in Covid variant cases, crude traders on Tuesday continued to worry that the virus could ruin recovery projections, and as a result oil prices declined, albeit minimally.

Brent slipped 2 cents to settle at $74.48 per barrel, while West Texas Intermediate fell 26 cents to settle at $71.65.

Investors were apparently unimpressed by analytical estimates of U.S. crude stocks falling by about 2.9 million barrels and gasoline stocks by 900,000 barrels in the week to July 23; however, oil was said to have rebounded in post-market trading when the American Petroleum Institute disclosed far larger drawdowns: 4.73 million barrels for crude and 6.23 million barrels for gasoline.

Prior to that revelation, Phil Flynn, senior market analyst at Price Futures Group Inc., said, "The problem right now seems to be the Delta variant of the coronavirus, which is holding the market back even though all the evidence right now suggests a dramatic tightening of supplies," which otherwise would causes prices to "break out to the upside."

John Kilduff, founding partner at Again Capital, said, "It's more of a hit to sentiment at this point: the petroleum complex is much more sensitive to the Covid-19 developments, particularly when they're going negative."

For its part, the International Monetary Fund maintained a 6 percent global growth forecast for 2021, upgrading its outlook for wealthy economies but cutting estimates for developing countries struggling with infections.

Additionally, U.S. consumer confidence reportedly reached a 17 month high in July, and ANZ analysts noted that "Robust road traffic data across most major regions suggests rising infections are having minimal impact" and will in fact cause global oil markets to remain in deficit.

And even though much has been made of rising infection rates in Asia, South Korea's S-Oil Corp said refining margins are expected to rebound in the third quarter, due to an increase in global mobility causing high demand.