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Oil Fluctuates as Rising Equities Offset China’s Delta Outbreak


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These translations are done via Google Translate
(Bloomberg) Oil erased earlier declines as improving sentiment in other risk assets countered coronavirus outbreaks in key consumer China.West Texas Intermediate futures traded little changed, having retreated 4.6% in the previous two sessions. Stocks in Europe rose for a third day, shrugging off the threat of the latest spread of the virus. The delta strain of Covid-19 has been detected in almost half of China’s 32 provinces in just two weeks, and at least 46 cities have advised residents not to travel unless strictly necessary.

WTI has declined on concern about the outbreak in China

“The positive momentum in stock markets has spilled over, but the upside is capped due to worries regarding oil demand,” said Hans van Cleef, senior energy economist at ABN Amro Bank.

After ekeing out a small advance in July, August is proving to be tough for crude. Tightened controls in some Asian nations to curb the spread of the virus risk eroding oil demand at a time when the Organization of Petroleum Exporting Countries and its allies are gradually increasing supply.

Prices:
  • WTI for September delivery slipped 2 cents to $70.54 a barrel as of 9:48 a.m. London time
  • Brent for October settlement was up 15 cents at $72.56 a barrel

China’s latest outbreak has spread to Beijing despite the capital’s stringent measures, with authorities taking steps Tuesday to ban rail passengers from 23 regions. The financial hub of Shanghai also reported a virus case this week. As risks escalate, analysts are reviewing their economic growth projections.

Still, there are positive signs for oil elsewhere. U.S. crude stockpiles may have dropped further, with the American Petroleum Institute reporting a 879,000-barrel weekly decline, according to people familiar with the data. Gasoline holdings shed 5.75 million barrels, the people said. Official government numbers are due later on Wednesday.

There have also been rising tensions near the Persian Gulf — a region vital for the world’s oil markets — in the past week. The British Navy said a ship was safe following a possible hijacking near Iran, days after a deadly drone attack on a tanker that the U.S., U.K. and Israel all blamed on the Islamic Republic.

Related coverage:
  • Occidental Petroleum Corp. will use its biggest cash windfall in more than a decade to cut debt, rather than to raise payouts.
  • Hedge fund Engine No. 1’s campaign against Exxon Mobil Corp. marked a seismic victory over an oil giant on environmental issues. Which companies may be next?
  • For the second week in a row, the recovery in global air traffic has taken a step back. Airline seat capacity dropped to 68% of the amount offered in the same week of 2019, according to Bloomberg’s flight tracker.


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