Oil prices fell on Wednesday due to lowered forecasts for fuel demand in China after mobility restrictions stemming from the spread of the highly contagious Delta variant of the coronavirus. The decline offsets the bullish outlook for US fuel demand.
West Texas Intermediate (WTI) crude futures fell 18 cents, or 0.3%, to $68.11 at 0500 GMT, after gaining 2.7% on Tuesday.
Brent crude futures fell 16 cents to $70.47 a barrel after gaining 2.3% on Tuesday.
Although both contracts regained their 100-day daily moving averages, they don’t appear to make any meaningful rebounds as Delta variant fears continue to weigh on the markets. Short-term momentum in Asia has dwindled rapidly.
Beijing imposed travel restrictions that would dampen fuel demand from the world’s second-largest oil consumer, causing Goldman Sachs to lower its demand forecast for China by 1 million barrels per day for the next two months. Bank’s baseline remains that the Delta wave will only impact demand for two months, consistent with previous cycles, including most recently in India.
While industry data showed U.S. crude oil and gasoline stockpiles fell last week, the U.S. Energy Information Administration raised its 2021 fuel demand forecast, saying consumption in the May-July period was higher than expected, supporting prices.
U.S. crude output to fall less in 2021 than previously forecastaccording to EIA.
In the week ended August 6, US crude inventories fell by 816.00 barrels and gasoline inventories fell by 1.1 million barrels.
Weekly figures from the EIA will be released on Wednesday.
With OECD commercial crude inventories already falling to pre-COVID levels, a tightening oil market outlook will likely fuel oil price increases.