Oil prices rose in tandem with broader equity gains, indicating that investors believe global economic growth will continue even after COVID-19’s resurgence.
On Tuesday, in New York, futures rose 2.7 per cent, the most in more than two weeks. Stocks in the United States and Europe reached new highs on expectations that economic growth will remain robust. At the same time, the delta variant has increased infections and movement restrictions. Global consumption expects to hold steady and tighten the market by the end of the year.
According to Phil Streible, chief market strategist at Chicago-based Blue Line Futures LLC, crude oil is riding the coattails of a strong showing in U.S. equity markets.
Some investors are also hoping that the delta variant spread demand will mitigate, if only slightly.
American Petroleum Institute
The API, funded by the industry, reported that crude stockpiles in the United States fell by 816,000 barrels last week. At the same time, gasoline inventories fell by 1.11 million barrels. On Wednesday, the U.S. government will release its supply data.
In the short term, however, the virus’s spread in Asia, where many countries are lagging in vaccination rates, is putting a damper on fuel consumption. The resurgence of the pandemic in the United States, particularly in states where vaccine uptake is low, is also causing concern.
Jean Zou, an analyst at commodities researcher ICIS-China, China Petroleum (NYSE: SNP) & Chemical Corp, is cutting run rates at some plants by 5% to 10% compared to previously planned levels this month.
According to data from aviation specialist OAG, the number of seats offered by Chinese airlines has dropped the most since the beginning of the pandemic. The country imposed new restrictions to contain the latest wave.
According to Vandana Hari, founder of consultant Vanda Insights, China’s COVID-Zero strategy means restrictions could continue to widen and tighten, reducing oil consumption. Delta outbreaks unquestionably caused a reassessment of the previously anticipated trajectory of global demand recovery.
Meanwhile, virus cases in the United States reached their highest weekly level since early February. For the second week, gasoline demand fell 1% to 9.486 million barrels per day in the week ending.
According to the Energy Information Administration’s Short-Term Energy Outlook, gasoline consumption in the United States averaged 8.6 million barrels per day in the first half of this year. According to the report, demand from May to July was higher than expected by the EIA. It will continue to rise to nearly 9 million barrels per day by 2022. According to the data, distillate supplies increased by 673,000 barrels.
The gold price on the Multi Commodity Exchange (MCX) fell below 46,000 per 10 gm for the first time in four months. In the last three trading sessions, gold futures fell nearly 1.3 per cent. Silver fell more than 1.5 per cent.
According to commodity experts, the recent drop in the price of yellow metal is due to the strong U.S. dollar and U.S. job data. The gold price has strong support in the international market. While at the MCX, a good accumulation zone is between 44,700 and 45,300 per 10 gm. Long-term, gold prices are favourable. One should maintain a buy on dips strategy until gold prices remain above 44,700 per 10 gm at MCX.