By Sharon Cho and Rakteem Katakey on 8/5/2021
(Bloomberg) –Brent crude fluctuated after sliding below $70 a barrel for the first time in two weeks, as traders weighed the continuing spread of the delta variant against strong equity markets.
China’s government has imposed fresh curbs on travel to combat the highly infectious strain of the coronavirus. Meanwhile in the U.S., oil inventories unexpectedly rose last week, pressuring prices. Still, sentiment in other risk assets is improving, with European stocks and U.S. equity futures trading higher. The dollar slipped, making commodities that are priced in the currency more attractive.
The oil-market mood is “shifting from demand-destruction fear to realization that the market is still in deficit and demand likely still recovers, though in an uneven way,” said Giovanni Staunovo, an analyst at UBS Group AG. “Delta-related concern will keep prices volatile.”
Delta’s spread is challenging the global recovery, which had driven prices of commodities to multiyear highs late last month. The impact of the latest Chinese outbreaks can already be seen, with traffic thinning on some of the country’s typically busy city roads and raising concerns about near-term fuel demand.
- Brent for October settlement rose 0.5% to $70.75 a barrel as of 1:48 p.m. in London, after falling to as low as $69.75 earlier
- West Texas Intermediate for September was up 0.5% at $68.51 a barrel, recovering from a loss of as much as 0.8%
New travel and movement restrictions in China include the capital, Beijing. Meanwhile Hong Kong has reimposed quarantine on travelers from the mainland, though an exception remains in place for the southern Guangdong province, a neighbor to the financial hub.
Prompt timespreads — the gap between the most immediate futures contracts and those a month later — have slumped in recent days, pointing to declining confidence in the market. First-month WTI was trading at a premium of 38 cents a barrel to the next month on Thursday, down from 75 cents at the start of this week. Brent’s structure has seen a similar retreat.