Oil prices fell for the second straight day, with WTI dropping back below $70 as the spread of COVID's delta variant in China threatens to disrupt the recovery in global crude consumption.
“China demand concerns because of the renewed restrictions from the viral spread were what caused the earlier weakness,” said Phil Flynn, senior market analyst at Price Futures Group.
However, the prices bounced somewhat by the “potential hijack” of a ship in the Gulf of Oman.
Crude -879k (-3mm exp)
Analysts expected yet another sizable crude draw in the last week but were disappointed when API reported a surprisingly small 879k drop in stocks (vs 3mm exp).
WTI traded back below $70 and bounced back intraday to hover around $70.50 ahead of the API print.
“Asia-Pacific is currently the focal point of lockdowns,” said Pavel Molchanov, an analyst at Raymond James & Associates Inc.
“There are 887 million people worldwide are currently in lockdown, which is more than at the beginning of 2021, and 85% of them are in Asia-Pacific.”
Crude’s decline also put the U.S. benchmark under technical pressure. WTI fell below its 50-day moving average and is edging closer to its 100-day moving average.
Such moves can often spark additional selling from trend-following funds.