Still, oil's fundamentals seem to be holding up, according to data: File Image/Pixabay
Oil prices on Wednesday continued their Covid driven slide, pressured additionally by a stronger U.S. dollar as well as the expectation of shale production ramping up in September.
Relatively ignored was a key physical sign of continued demand despite rising Delta variation infections: crude and gasoline inventory draws in the U.S.
Brent was down 5 cents at $68.98 per barrel by 0139 GMT, and West Texas Intermediate lost 6 cents to $66.53 per barrel, said to be the result of investors suddenly wary about prospects for stronger fuel demand as the use of rail, air and other forms of transport remains impacted by rising infections, especially in China.
Matthias Scheiber, Wells Fargo Asset Management
We think some of the fears about Delta....might actually be overdone
Henning Gloystein, energy director at Eurasia Group, said in a note, "July oil demand looks pretty weak because of China's industrial and retail slowdown, the floods there, as well as severe port congestion and a government clamp-down on the import quote of private refiners.
"In India, the economic fallout of the severe Covid-19 outbreak earlier this year still weighs on the economy and consumer travel behaviour."
But rising infections don't necessarily result in demand destruction, if the U.S. is any example: a Reuters poll showed that crude and gasoline inventories in the United States are expected to have fallen last week; also, demand is apparently healthy enough for an anticipated rise in shale production to 8.1 million barrels per day (bpd) in September, the highest since April 2020, according to the Energy Information Administration.
Indeed, Matthias Scheiber, head of multi-asset solutions at Wells Fargo Asset Management, said, "We think some of the fears about Delta, especially in Europe, might actually be overdone, especially as countries like Germany or France have been catching up in terms of vaccination rates."
Plus, in the bigger picture, oil's future continues to hold promise globally, the latest example of this being Guyana: a government official for the South American country said on Wednesday that its economy is expected to expand by 500 percent due to it becoming one of the world's oil exploration hot spots after a group led by Exxon Mobil Corp discovered more than 9 billion barrels of oil and gas.
Still, as John Kemp, commodities analyst at Reuters pointed out, "The resumption of aviation, especially long-haul passenger flights, has...become critical to the full recovery in petroleum consumption."
Kemp noted that "the expected resumption of widespread long-haul flying, which had already been pushed back from the second quarter of 2021 to the second half, now looks likely to be delayed even further until well into 2022."