Crude oil futures fall on pandemic concerns, bearish IEA report

0315 GMT: Crude oil futures were lower during midmorning Asia trade Aug. 13 as pandemic concerns continued to keep prices in check, with the sentiment also taking a hit after the International Energy Agency said global oil demand recovery had reversed its course in July.

At 11:15 am Singapore time (0315 GMT), the ICE October Brent futures contract was down 48 cents/b (0.67%) from the previous close at $70.83/b while the NYMEX September light sweet crude contract was down 51 cents/b (0.74%) at $68.58/b.

The spread of the delta variant of the coronavirus can potentially jeopardize the global economic recovery and sap demand for oil and energy, analysts said.

Parts of major Asia-Pacific regional economies, including India, China and Australia, have imposed mobility restrictions in a bid to curb infection numbers. The market is particularly concerned about the world's second largest oil consumer China, which is currently dealing with its broadest outbreak since 2019.

"Crude oil fell as concerns of weaker demand amid the spreading Delta variant grew. A COVID-zero approach by Chinese authorities has seen strict guidelines on movement," ANZ analysts said in an Aug. 13 note.

The situation was also grim in the West, with COVID-19 infection numbers in the US and countries in Europe remaining elevated.

The delta variant has spread so rapidly in the US that the Centers for Disease Control and Prevention said more than 90% of the counties are experiencing substantial or high transmission rates. The seven-day moving average of infections in the US has surged to 124,234 as of Aug. 11, the highest since early February, data from The New York Times showed.

Amid rising infection numbers, the IEA said in its latest oil market report released Aug. 12 that the global oil demand recovery went into reverse in July, when oil demand fell by 120,000 b/d.

In the report, the agency lowered its estimate for 2021 demand growth to 5.3 million b/d from 5.4 million b/d, while raising its 2022 growth estimate to 3.2 million b/d from 3 million b/d.

The IEA also lowered its estimate of supply growth from outside the OPEC+ alliance this year to 600,000 b/d from 770,000 b/d, noting a heavier-than-expected impact from maintenance and outages in the North Sea and Brazil.

Meanwhile, the OPEC in its monthly oil market report, also released Aug. 12, kept global oil demand forecasts for 2021 and 2022 unchanged from its previous forecast.

The producer-bloc said it expects demand to remain higher than supply in the coming months, despite the OPEC+ coalition's plan to ease production cuts by 400,000 b/d each month going forward, and despite an expected increase in non-OPEC supply.

The US has criticized the alliance and said the group's output cuts have led to higher oil prices, which could jeopardize the global economic recovery.