Oil squeezed out its first weekly gain in three on signs that global demand is holding up despite concerns that the renewed spread of COVID-19 could stall the recovery.
Futures in New York rose 0.3 percent this week, completely recouping a sell-off on Monday that was stoked by the rapidly spreading delta variant of SARS-CoV-2.
Fuel demand and road traffic from the US to Asia and Europe remains resilient, underscoring expectations that the recovery has not been derailed and global inventories will continue to shrink.
Photo: AP
“The fact of the matter is that we’re not going to see, at least in the US and in Europe, a massive return to strict lockdown,” Oanda Corp senior market analyst Ed Moya said.
Crude has rallied nearly 50 percent this year as ongoing vaccination campaigns have propelled reopenings. Data this week showed gasoline demand is essentially back to normal in many of the biggest consuming countries.
West Texas Intermediate crude for September delivery on Friday rose US$0.16 to US$72.07 a barrel, up 0.3 percent for the week.
Brent crude oil for September delivery on Friday rose US$0.31 to US$74.10 a barrel, up 0.7 percent weekly.
The 7.5 percent price slump on Monday came just a day after OPEC and its allies led by Saudi Arabia and Russia finalized an agreement to gradually restore production they halted during the COVID-19 pandemic.
OPEC+’s modest increase eased fears around concerns of oversupply.
“Everybody thinks they are going to flood the market, and then they take a step back and realize that, hey, they’re adding because the supply is being burned off,” said Phil Streible, chief market strategist at Blue Line Futures LLC in Chicago.
The recent dip in prices is a buying opportunity and Brent prices should hit US$100 per barrel next year, a group of analysts at Bank of America Corp said in a note to clients.
JET FUEL GLUT
The US is swimming in so much jet fuel that even this summer’s surge in air travel cannot save the market.
Air traffic in the US has jumped to more than 2 million passengers a day, about 78 percent of where it was in the summer of 2019, according to the US Transportation Security Administration.
That has done little to diminish the massive glut in jet fuel stockpiles, which stand at their highest seasonal level in a decade. Part of the problem is that refiners are trying to cash in on resurgent gasoline demand by raising production rates, which indirectly leads to more jet fuel output.
The global oil market cannot fully recover to pre-pandemic levels until jet fuel consumption is back to normal.
The US has one barrel of jet fuel for every three barrels of diesel and every five barrels of gasoline in inventory, US Energy Information Administration figures show, leaving the aviation sector exerting considerable influence on how much refiners can process.
“Traffic data is a false flag for the jet fuel market,” Rapidan Energy Group director of global oil service Zachary Rogers said.
“The real metric is the quantity of international flights, which at this point has barely recovered, and there are looming headwinds,” he said.
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