Oil Dips on Delta Concerns Ahead of U.S. Inventory Data Release

© Reuters.

By Barani Krishnan

AiVIF.com - Oil prices dipped for a second straight day on Tuesday as a surge in the Delta variant of Covid continued to pose headwinds for the market.

But losses in crude prices were limited by optimism that the U.S. stockpile count for last week may have shown a renewed drop after the previous week’s rise.

Global cases of Covid-19 have increased the most in two months with infections surging in the United States, Brazil, India, Indonesia and Britain. On Monday, the U.S. State Department raised a Covid-19 travel warning for Spain to the highest level.

Infections from the Delta variant of the virus have been particularly acute in countries with lower vaccination coverage. Renewed social restrictions in some countries are also posing a threat to fuel consumption and demand for oil.

“Oil prices have been leveling off the last couple of days after enjoying a strong rebound from last Monday's sell-off,” OANDA analyst Craig Erlam said, referring to the July 19 tumble of 7.5% in U.S. crude’s West Texas Intermediate benchmark.

“Oil, like other risk assets, has been in wait-and-see mode, something that will likely change in the coming hours and days.”

New York-traded West Texas Intermediate crude, the benchmark for U.S. oil, settled down 26 cents, or 0.4%, at $71.65 per barrel. 

London-traded Brent, the global benchmark for oil, finished the session down 98 cents, or 1.3%, at $73.52. 

Losses in oil were muted by expectations that the API, or American Petroleum Institute, will issue market-friendly inventory data later in the day.

API will issue at 4:30 PM ET (20:30 GMT) a snapshot of U.S. crude, gasoline and distillate inventories for the week ended July 16. The figures serve as a precursor to the official weekly inventory data due on Wednesday from the EIA, or U.S. Energy Information Administration. More than the API’s numbers, disappointment over what the EIA releases could have a major impact on the market.

According to a consensus of analysts tracked by AiVIF.com, U.S. crude stockpiles likely fell by 2.93 million barrels last week, versus the previous week’s build of 2.1 million.

Gasoline inventories potentially fell 916,000 barrels versus the draw of 121,000 in the prior week, consensus shows.

But stockpiles of distillates, made up of diesel and heating oil, likely grew by 435,00 barrels last week after sliding by 1.35 million the week before.