Oil dropped at the week’s opening as the continued spread of the delta coronavirus variant hurt prospects for global demand.
West Texas Intermediate fell 0.5% after a 0.9% loss on Friday (Aug 13). In Asia, cases were at or near records in Thailand, Vietnam and the Philippines. Anthony Fauci, U.S. President Joe Biden’s chief medical adviser, said that the country was prepared to distribute a third shot of vaccine should that be needed.
After soaring in the first half, crude oil’s rally has started to fray since mid-July. The spread of delta, including in key consumer China, has undermined the outlook for consumption as restrictions on mobility are reintroduced. At the same time, OPEC+ has proceeded with plans to gradually increase production, rolling back the supply curbs it imposed in the early days of the pandemic.
There are signs U.S. shale producers are ramping up activities The total number of rigs searching for oil across the country rose by 10 last week to 397, marking the biggest weekly jump since April, according to Baker Hughes Inc. data on Friday. Most of the gains came outside the Permian Basin.
Crude’s drop has been reflected in the market’s deteriorating pricing patterns. Brent’s time spread was 38 cents a barrel in backwardation on Monday (Aug 16). While that remains a bullish pattern, it’s down from above 90 cents in late July.
China has been dealing with its most widespread Covid-19 outbreak since the initial cases in 2020, with fresh lockdowns imposed in some cities to combat the disease. How that’s affecting the economy will become clearer later on Monday, when July industrial output and retail sales data are released.