Oil prices end slightly lower, but within well-worn range

Crude oil futures ended slightly lower Aug. 12, but remained within a well-worn range as traders continued to assess the demand concerns stemming from the rapid spread of the coronavirus delta variant.

NYMEX WTI front-month crude settled 16 cents lower at $69.09/b, while ICE front-month Brent settled at $71.31/b, down 13 cents.

In refined products, NYMEX front-month RBOB fell 2.68 cents to settle at $2.2754/gal and ULSD settled 19 points lower at $2.1039/gal.

The spread of the delta variant has pulled NYMEX crude below the nearly $74/b level seen at the end of July, but prices have so far had a hard time pushing below $66/b as there is still some optimism that the distribution of vaccines will prevent widespread lockdowns.

The International Energy Agency Aug. 12 lowered its estimate of 2021 demand growth to 5.3 million b/d from 5.4 million b/d, and cut its second-half 2021 demand estimate by 600,000 b/d to 98.15 million b/d.

The IEA pointed to a 120,000 b/d drop in July demand because of the coronavirus resurgence in China, Indonesia and elsewhere in Asia.

But OPEC said Aug. 12 it was keeping its global demand forecasts for 2021 and 2022 unchanged, and that oil demand should remain higher than supply over the coming months.

"It is not yet clear whether the spread of the delta variant will have more of a breaking effect on demand after all," Carsten Fitsch, an analyst at Commerzbank, said in an Aug. 12 note.

While US implied gasoline demand has softened, demand in parts of Europe, including the Mediterranean, remained exceptionally strong as the holiday season continued.

Oil prices may continue to see-saw in the near term amid mixed fundamentals but, further out, the view is more favorable.

"It is a little hard to predict oil's short-term direction, as the herd could change direction at any moment. Looking at oil on a longer-term basis, the global recovery remains on track, albeit in a very uneven way dictated by the vaccine haves and have-nots," said Jeffrey Halley, senior market analyst at OANDA, in an Aug. 12 note.

Fred takes aim

In the near term, offshore Gulf of Mexico oil and gas producers are keeping an eye on Tropical Depression Fred, which is expected to strengthen into a tropical storm by late Aug. 13 and head into the eastern Gulf the following day, according to the National Hurricane Center.

The far-western projected path of Fred cuts right about at the edge of Shell's Appomattox field, a 175,000 boe/d large platform that began production in 2019. The hub is the first to have produced from the emerging Norphlet play where Shell has been a leader in recent years with a handful of discoveries.

Also, due south from the Alabama-Mississippi area -- the western edge of Fred's "cone of uncertainty" -- are two Occidental Petroleum-operated production hubs, Marlin and Horn Mountain. Fred is projected to make landfall in the Florida panhandle as a tropical storm, which could have winds of up to 73 miles per hour.