Oil Ekes Out Modest Gains But Trading Behaviour Remains Driven By Covid Fear

Still, the U.S., will likely record another healthy weekly drawdown of stocks: File Image/Pixabay

A mild respite to the seemingly endless fearful crude trading patterns of the past three weeks came on Tuesday, when another anticipated drop in U.S. crude, gasoline and other products caused a modest uptick in oil prices.

Brent rose by 30 cents at $69.34 per barrel by 0106 GMT, while West Texas Intermediate climbed by  43 cents at $66.91 per barrel.

But the Covid concerns, driven largely by possible consequences of renewed restrictions in Asia where the Delta variant is causing infection rises, remained: in noting that some cities in China have stepped up mass testing, ANZ Research said in a note, "This is already weighing on mobility."

Although Amrita Sen, head of research at Energy Aspects, said on Monday that Asia's challenges with the Delta variant will likely be wrestled under control in a few weeks (in no small way due to an aggressive ramping up of vaccination programs in that part of the world), media reported that China Petroleum & Chemical Corp., the nation's biggest refiner, is cutting run rates at some plants by up to 10 percent compared with previously planned levels this month.

ANZ added, "Investors are also questioning the recovery in the U.S. amid rising case numbers: U.S. air travel has plateaued for almost two months amid ongoing travel restrictions."

And yet, a Reuters poll predicted that crude oil inventories  have fallen by about 1.1 barrels in the week to August 6, according to the average estimate of six analysts.

Also, U.S. stocks rebounded sharply on Thursday as unemployment claims declined and the trade deficit widened: positive economic news despite rising Covid cases and an impending decline in  Federal Reserve stimulus as recovery in the western world marches on.

Phil Streible, chief market strategist at Blue Line Futures, expressed cautious optimism on Tuesday by stating, "Some investors are getting optimistic that the blow to demand from the Delta variant spread is tampering off, if even just slightly."

Investor may presumably take solace in comments made by Dr. Scott Gottlieb, former Food & Drug Administration commissioner, to CNBC: on Monday he said, "I don't think Covid is going to be epidemic all through the fall and the winter: I think that this is the final wave, the final act, assuming we don't have a variant emerge that pierces the immunity offered by prior infection or vaccination."