Crude rallies on US outlook; pandemic concerns weigh

Crude prices settled higher Aug. 5 on the back of strong US economic data, but pandemic-induced demand concerns capped the rally.

NYMEX September WTI settled 94 cents higher at $69.09/b and ICE October Brent climbed 91 cents to $71.29/b.

Weekly US jobless claims fell to 385,000 in the week ended July 31, Department of Labor data showed Aug. 5, in line with market expectations and down 14,000 from the week prior. The data offered a bullish counterpoint to the ADP jobs report released Aug. 4 showing US payrolls added just 330,000 jobs in July, well under market expectations of around 683,000. The official Labor Department unemployment report for July is expected Aug. 6.

"Expectations are surging that tomorrow's nonfarm payroll report will be robust," OANDA's senior market analyst Edward Moya said in a note.

NYMEX September RBOB settled 4.4 cents higher at $2.2940/gal and September ULSD climbed 3.19 cents to $2.1060/gal.

RBOB cracks continued to strengthen following a larger-than-expected 5.29 million-barrel draw in US gasoline stocks during the week ended July 30. The ICE New York Harbor RBOB crack versus Brent climbed to $18.52/b in afternoon trading, up from $17.93/b the session prior.

Against this backdrop, the continued spread of the COVID-19 delta variant clouded demand outlooks and capped the price rally, analysts said.

In China, government officials have responded to fast rising case counts with sweeping lockdowns in cities across the country, a move that threatens to blunt recent gains in the region's refined product consumption.

"Obviously, the big uncertainty is how this situation will evolve in the coming weeks, and what it means for oil demand. For now, restrictions seem to be having more of an impact on domestic air travel, and so we are likely to see jet fuel demand coming under some pressure," ING analysts said in a note Aug. 5.