Oil prices steadied on Aug. 20, clambering away from three-month lows, but they were still on track for a weekly loss of more than 5% as new lockdowns in countries facing surging cases of the COVID-19 Delta variant dampened the outlook for fuel demand.
Broader investor risk aversion also weighed on oil with the U.S. dollar jumping to a nine-month high on signs the U.S. Federal Reserve is considering reducing stimulus this year.
“The spread of the Delta variant amid moderating economic growth and the prospects of tighter monetary policy are creating short-term ripples in the commodity market,” ANZ commodity analysts said in a note.
“Increasing restrictions on mobility are raising concerns for oil demand.”
Brent crude futures rose 24 cents or 0.4% to $66.69/bbl at 0635 GMT, after dropping 2.6% on Aug. 19 to its lowest close since May.
WTI crude in the U.S. futures for September, due to expire on Aug. 20, rose 38 cents or 0.6% to $64.07/bbl, after sliding 2.7% on Aug. 19. The more active October contract was up 26 cents at $63.76/bbl.
“The latest lockdowns in major economies around the world has likely harmed the economic activities and growth forecasts in the months to come,” said Margaret Yang, a strategist at Singapore-based DailyFX.
“Japan has extended its emergency lockdown and confirmed cases are on the rise in countries such as South Korea, Malaysia, Philippines, Vietnam and Thailand, whose industries need oil, which will also be affected by the Delta variant,” Yang added.
China has imposed new restrictions with its “zero tolerance” coronavirus policy, affecting shipping and global supply chains, and the U.S. and China have imposed tit-for-tat flight capacity restrictions.
Meanwhile, Delta variant outbreaks in Australia and New Zealand have also sparked strict lockdowns.
The approaching end of the U.S. peak gasoline demand season and end of summer holidays in Europe and the United States are also set to sap oil demand.
“Aviation remains the weakest component of global demand at the moment, and the risk of further restrictions on domestic and international travel due to the Delta variant will be a key variable for oil over the remainder of H2, particularly as the U.S. driving season ends,” said Stephen Innes, managing partner of SPI Asset Management.
Recommended Reading
LS Power Completes Acquisition of Algonquin Power’s Renewables Unit
2025-01-09 - With the transaction’s closure on Jan. 8, LS Power formed Clearlight Energy to manage the acquired renewable energy assets.
TotalEnergies, Air Liquide Form Hydrogen Joint Venture
2025-02-18 - TotalEnergies says it will work with Air Liquide on two projects in Europe, producing about 45,000 tons per year of green hydrogen.
Type One Energy, Private Equity Firm Partner to Advance Fusion Energy
2025-02-14 - The partnership between Pine Island New Energy Partners and Type One Energy focuses on identifying and evaluating fusion industry supplier chain companies to grow the sector.
EDF, TAQA Sign MOU to Advance Geothermal Systems in Saudi Arabia
2025-02-13 - EDF Saudi Arabia and TAQA Geothermal Energy will collaborate on geothermal cooling systems including power generation, HVAC applications and compressed air energy storage.
Enverus Acquires Pearl Street Technologies to Help Bolster Grid
2025-03-13 - The acquisition of the spinout from Carnegie Mellon University strengthens Enverus’ suite of offerings as it expands deeper into power and energy transition solutions, the company says.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.