Oil prices rally as China’s virus success eases demand fears

By Alex Longley and Sheela Tobben on 8/24/2021

(Bloomberg) --Oil prices in New York gained for a second session, building on the biggest one-day gain in nine months, amid glimmers of optimism among bulls that the delta coronavirus variant’s hit to demand may be passing.

U.S. oil futures rose as much as 2.9% while Brent futures topped $70 a barrel. China has rapidly brought local virus cases down to zero and traffic is showing signs of recovery, although the variant continues to impact other regions.

In yet another positive sign for demand, the country re-opened its Ningbo port, one of the busiest in the world, after a two-week shutdown. Separately, a fire on a Mexican oil platform wiped out more than 400,000 barrels a day of the nation’s output, curbing supply.

“The developments out of China are reigniting expectations that oil demand would start to rise again,” said Phil Flynn, senior market analyst at Price Futures Group Inc. Meanwhile, Mexico’s platform outage is curtailing supply just as the market speculates OPEC+ may not proceed with previous plans to restore output when it meets next month, he said.

Covid’s resurgence has interrupted oil’s rally and has prompted speculation that OPEC+ may reassess its current plan to return additional barrels to the market. The group next meets Sept. 1. Goldman Sachs Group Inc., however, reiterated that the demand impact from delta would be transient, while UBS Group AG sees Brent crude recovering to $75 a barrel on market tightness.

Monday’s rally also saw a sharp strengthening timespreads that indicate market strength. The difference between the nearest two December Brent futures contracts jumped by the most since April. Gains in the global benchmark widened its spread to WTI to the widest premium since May.

Prices:

  • West Texas Intermediate for October delivery rose $1.74 to $67.38 a barrel by 11:03 a.m. in New York.
  • Brent for October settlement gained $1.83 to $70.58

Later this week, investors will also be considering the Jackson Hole symposium -- being held virtually from Thursday -- which may offer insights into how the Federal Reserve plans to scale back stimulus.

Chinese airlines plan to operate the fewest flights in August since February, according to data from Cirium, following the latest virus outbreak. In Malaysia, rising infections are threatening to aggravate shortages of semiconductors and other components that have hammered automakers for months.

Related News ///

FROM THE ARCHIVE ///

Comments ///

Comments

{{ error }}
{{ comment.comment.Name }} • {{ comment.timeAgo }}
{{ comment.comment.Text }}