Oil slipped as a surge in global Covid-19 cases raised concerns about demand holding up in the near term.
Futures in New York fell 0.4% on Tuesday. A rise in cases of the highly contagious delta variant has prompted new restrictions across the world, especially in countries with lower vaccination rates. U.S. health officials will advise fully vaccinated individuals to wear masks in public indoor settings in places with high transmission, in guidance to be released later Tuesday. “It’s more of a hit to sentiment at this point,” said John Kilduff, a partner at Again Capital LLC. “The petroleum complex is much more sensitive to the Covid-19 developments, particularly when they are going negative.”
U.S. benchmark crude futures are poised for the second monthly drop since October with the delta variant interrupting a rebound in demand. Though global inventories are expected to tighten through the end of the year, new movement restrictions have dampened fuel consumption in some countries. The positive test rate in Indonesia is the worst in Asia, while Thailand and Vietnam have introduced curfews to curb the spread of the virus.
While the International Monetary Fund sees global economic growth rebounding by the most in four decades this year, unequal access to vaccines will widen the economic recovery gap between advanced and developing economies, the fund said in an updated World Economic Outlook released Tuesday. “There are serious concerns about whether or not the global economies will hit a hiccup as a result of additional Covid variants,” said Gary Cunningham, director of market research at Tradition Energy.
Meanwhile, in the U.S., analysts surveyed by Bloomberg estimate a crude stockpile decline of 2.5 million barrels last week. The industry-funded American Petroleum Institute will release inventory data later Tuesday, while the U.S. government will release its weekly tally on Wednesday.
