Oil prices weakened for a fourth session on Tuesday, on the back of surging cases of coronavirus in Japan and a weak demand picture in Asia, and as OPEC and its allies believe the market does not need more crude.
Brent crude was down $0.03 at $69.48 per barrel as of 12:05 pm ET (1605 GMT.) US West Intermediate crude (WTI) fell $0.18, or 0.3%, to $67.11 a barrel. Both contracts had fallen for three straight sessions.
Japan, the world third largest economy, on Tuesday extended its state of emergency in Tokyo and other regions and announced new measures covering seven more prefectures to counter a spike in Covid-19 infections that is threatening the medical system. Meanwhile New Zealand entered a new lockdown after the country’s first coronavirus case in six months was reported. Hedge funds and money managers cut net long positions in US crude to the lowest since November in the week to August 10 as resurgent coronavirus infections in several countries dampened hopes of a rapid resumption in long-distance air travel.
“The oil market will likely require a distinct down trend in the virus that will allow China to reopen its economy in allowing the energy complex to establish a near-term base of support capable of reversing the long liquidation out of the WTI space,” said Jim Ritterbusch, President of Ritterbusch and Associates in Galena, Illinois.
Daily crude processing in China, the world’s biggest oil importer, fell to its lowest in July since May 2020 as independent plants slashed production amid tighter quotas, high inventories and weakening profits, data showed on Monday. China’s factory output and retail sales growth also slowed sharply and missed expectations in July, as new Covid-19 outbreaks and floods disrupted businesses.
On the supply side, US shale oil output is expected to rise to 8.1 million barrels per day (bpd) in September, the highest since April 2020, according government data on Monday. Last week, US President Joe Biden’s administration urged OPEC+, which groups members of the Organisation of the Petroleum Exporting Countries and other producers such as Russia, to boost oil output to tackle rising gasoline prices. But four sources told Reuters on Monday that the group believes oil markets do not need more crude than they plan to release in the coming months.
Published in The Express Tribune, August 18th, 2021.
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