Oil extended gains after jumping more than 5% amid a broader marker rally, despite the Covid-19 resurgence clouding the economic outlook.
Futures in New York rose above $66 a barrel after surging for the first time in eight sessions on Monday, snapping the worst losing streak since October 2019. While China has rapidly brought local coronavirus cases down to zero following its latest outbreak, the fast-spreading delta variant continues to sweep through other regions, prompting renewed restrictions on mobility.
Oil surges after the worst losing streak since 2019
The Covid-19 resurgence has interrupted oil’s rally and may prompt OPEC+ to reassess its plan to return additional barrels to the market each month until all of its halted output is revived. The group is scheduled to next meet on Sept. 1. Goldman Sachs Group Inc., however, reiterated that the impact to demand from delta would be transient and that prices should push higher.
The market will also be looking toward the Jackson Hole symposium from Thursday — being held virtually — which may offer insights into how the Federal Reserve plans to scale back stimulus.
“The market is taking some comfort in the fact that it appears as though China has brought the latest Covid-19 outbreak under control,” said Singapore-based Warren Patterson, the head of commodities strategy at ING Group. “This should help to ease worries over demand.”
- West Texas Intermediate for October delivery rose 0.7% to $66.10 a barrel on the New York Mercantile Exchange at 10:29 a.m. in Singapore after jumping 5.6% on Monday.
- Brent for October settlement gained 0.8% to $69.27 on the ICE Future Europe exchange after surging 5.5% on Monday.
- The futures curve has weakened amid the flare-up. The prompt timespread for Brent was 44 cents in backwardation — a bullish structure where near-dated contracts are more expensive than later-dated ones. That compares with 92 cents at the end of July.
Chinese airlines plan to operate the fewest flights in August since February, according to data from Cirium, following the latest virus outbreak. In Malaysia, infections are rising and threatening to aggravate shortages of semiconductors and other components that have hammered automakers for months.