Oil Down, COVID-19 as Outbreaks Reignite Fuel Demand Concerns

Oil was down Thursday morning in Asia, its first loss in four sessions, as COVID-19 outbreaks globally and restrictive measures ramp up fuel demand concerns.

Brent oil futures were down 0.62% to $70.84 by 11:49 PM ET (3:49 AM GMT) after jumping 1.7% on Wednesday. WTI futures fell 0.78% to $67.83 after gaining 1.2% during the previous session.

Concerns about the global COVID-19 outbreaks involving the virus’ Delta variant continue to cloud the outlook for fuel demand and commodities in general.

However, some investors were cautiously optimistic.

“Given the risks around the COVID-19 Delta variant, but also the accelerating vaccine programs, it’s possible that the second half of the year also sees a bit of a stop-and-go development before things (hopefully) normalize in 2022,” Eurasia Group analysts said in a note.

Investors also digested Wednesday’s U.S. crude oil supply data from the Energy Information Administration (EIA). The data showed a draw of 2.979 million barrels for the week to August 20. Forecasts prepared by Investing.com predicted a 2.683-million-barrel draw, while a 3.234-million-barrel draw was recorded during the previous week.

Crude data from the American Petroleum Institute the day before showed a draw of 1.622 million barrels.

However, not all the data was positive, with the EIA data also showing a 645,000-barrel build in distillate stocks, which is inclusive of diesel and jet fuel.

“The headline draw was welcome news but a steep drop in crude exports and lacklustre jet fuel demand prevented prices from extending gains,” OANDA senior analyst Edward Moya said in a note.

A fire that broke out earlier in the week in Mexico that knocked a little over 400,000 barrels per day (bpd) of production, gave the black liquid a boost. Petróleos Mexicanos has since recovered 71,000 bpd of production and targets adding an additional 110,000 bpd within the next couple of hours.