Crude Oil Lower; Rising Covid Cases Weigh on Sentiment

© Reuters.

By Peter Nurse

AiVIF.com -- Crude oil prices edged lower Tuesday, continuing the previous session’s sharp selloff amid growing concerns the ongoing spread of Covid-19 will derail the economic recovery worldwide and hit demand.

By 9:55 AM ET (1355 GMT), U.S. crude futures traded 0.6% lower at $65.95 a barrel, after dropping more than 7% Monday, the worst session since September, while the Brent contract fell 0.6% to $68.22, after falling 6.8% to an eight-week low.

U.S. Gasoline RBOB Futures were down 0.7% at $2.0955 a gallon.

“Rising cases of the delta variant of the coronavirus in some Asian and European countries and possibilities of travel restrictions have increased crude oil demand uncertainty to some extent,” said analysts at ING, in a note.

Although the surge in Covid-19 cases was initially seen mainly in Asia, the average number of daily new cases in the United States has tripled in the past 30 days, according to Reuters data, climbing to 32,136 on Sunday.

The average number of people hospitalized has also risen 21% over the past 30 days to over 19,000, while deaths, which can lag behind other indicators, rose 25% last week to an average of 250 per day.

At the same time as Covid cases have risen, the Organization of the Petroleum Exporting Countries and its allies have agreed to add extra supply to the global crude market.

Still, “the output increments from the OPEC+ will help ease the supply tightness somewhat for the rest of the year but may not be sufficient to fill the entire supply gap, according to the IEA estimates released earlier in the month,” ING added.

An example of this supply tightness is expected later in the session, with the American Petroleum Institute set to release its weekly estimate of U.S. inventories. This is expected to show another draw, although last week’s number showed the smallest reduction in inventories in five weeks, suggesting that the rebound in demand in the U.S. may be slackening in the near term.

In corporate news, oilfield services company Halliburton (NYSE:HAL) reported a 33.5% jump in second-quarter profit from the previous three months, as a rebound in crude prices from pandemic lows buoyed demand.