Oil slips as Delta weighs on demand prospects

Tokyo — Oil prices dipped on Wednesday, a fifth day of declines with investors wary about prospects for stronger fuel demand as the use of rail, air and other forms of transport remained constrained amid surging Covid-19 cases worldwide.

Brent crude was down 5c, or 0.1%, at $68.98 a barrel by 1.39am GMT, having fallen 0.7% on Tuesday. US oil lost 6c, or 0.1%, to $66.53 a barrel after dropping 1% in the previous session.

“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 clampdown on the import quote of private refiners,” Henning Gloystein, energy director at Eurasia Group, said in a note.

“In India, the economic fallout of the severe Covid-19 outbreak earlier this year still weighs on the economy and consumer travel behaviour,” he said.

India, the world’s third-biggest crude importer, also started sales of oil to state-run refiners from its Strategic Petroleum Reserve (SPR), putting in practice a new policy to commercialise federal storage by leasing out space.

A stronger dollar was also hitting commodities across the board, with metals and precious gold in particular as “equally fragile” as oil, ANZ Research said in a note.

Crude is typically priced in dollars so a pricier Greenback makes oil more expensive, hitting demand.

In the US, more supply is set to hit the market if official forecasts prove right.

US shale oil production is expected to rise to 8.1-million barrels a day in September, the highest since April 2020, according to the government’s Energy Information Administration’s monthly drilling output report.

Crude and petrol inventories in the US are expected to have fallen last week, while distillate stockpiles are likely to have risen for a third consecutive week, an extended Reuters poll showed.

Based on the average estimates of nine analysts polled by Reuters, crude stocks dropped by about 1.1-million barrels in the week to August 13.

Reuters