NYMEX WTI contract enters correction territory as delta rise threatens outlook
WTI slips 10% from recent high
U.S. COVID-19 cases at six-month high
NYH RBOB crack hits new six-month low
Crude oil prices fell for the seventh straight session on August 20 amid a stronger dollar and concerns that the delta variant surge could dull the demand outlook.
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NYMEX September WTI fell $ 1.37 to $ 62.32 / bbl and ICE October Brent fell $ 1.27 to settle at $ 65.18 / bbl.
It was the seventh consecutive session lower for Brent and WTI, leaving contracts at their lowest level since May 20.
“Energy prices are melting as fears over delta variants continue to fuel concerns ahead of OPEC + ‘s next monthly production hike,” TD Securities analysts said in a note. “Our energy supply risk gauge has fallen significantly, indicating an easing of concerns about large deficits on the horizon, with the delta variant impacting demand expectations.”
OPEC + is expected to produce an additional 400,000 bpd in September, but US President Joe Biden has called on the group to further increase oil supply to lower crude prices and offset domestic pressure from high gasoline costs .
NYMEX WTI last experienced seven straight sessions of declines in September 2019, and this is the longest streak of declines for ICE Brent since February 2018.
The drop sent the NYMEX WTI down 10% from its most recent August 9 high, pushing it into corrective territory for the first time since late October 2020, when the first month’s contract slipped nearly 14% between October 20 and October 20. 30. ICE Brent has so far outperformed WTI, with the first month contract settling on August 20 just 8.7% below its most recent high.
The September NYMEX RBOB fell 5.79 cents to $ 2.0236 / gal and the September ULSD fell 6.08 cents to $ 1.9082 / gal.
The disproportionate weakness in crude prices in the United States was likely due to market nervousness that a recent resurgence in COVID-19 cases could herald a return to pandemic restrictions.
The United States reported 157,694 new cases of COVID-19 on August 18, according to the latest data from the Centers of Disease Control and Prevention, and the seven-day moving average stood at 133,055 cases – levels seen for the last time in February.
The rise in cases correlates with a deterioration in the NYMEX crude futures structure. The WTI contract for the coming year came in at a premium of $ 3.59 / bbl in the first month of August 20, compared to $ 8 / bbl in early July.
“Cases of delta variants continue to wreak havoc on the outlook for near-term crude demand,” Edward Moya, senior market analyst at OANDA, said in a note. “Crude prices will have a hard time catching up with an offer as the peak in summer driving is behind us and now the return to the office could be in jeopardy for many companies.”
Gasoline inventories in the United States rose unexpectedly during the week ended August 13, US Energy Information Administration data showed on August 18, suggesting a turnaround in demand even if it remained. three weeks of the seasonal driving season in the United States.
Rising inventories and slowing demand weighed on cracks in gasoline. The ICE New York Harbor RBOB crack against Brent fell to $ 14.10 in afternoon trading, on pace for the weakest close since February 12.
Oil prices face additional headwinds beyond the short-term impacts of the delta surge.
The US Federal Reserve has signaled that it could start cutting its bond purchases as early as September, which could cause interest rates to rise and increase pressure on energy demand in the coming months.
The more hawkish stance reported by the Fed has been bullish for the dollar in recent days, adding pressure on energy prices. The ICE US Dollar Index stood at 93.494 at the close of oil trade, down slightly from the nine-month high of 93.568 reached on August 19.