Crude sees longest down streak since March as delta spread weighs

Crude oil futures finished a volatile session lower Aug. 17 as near-term demand outlooks remained under pressure amid the spread of the COVID-19 delta variant across the globe.

NYMEX September WTI settled down 70 cents at $66.59/b and ICE October Brent declined 48 cents to $69.03/b.

It was the fourth-straight decline in crude prices, marking the longest downward streak since March when prices moved lower for five straight sessions. Front-month Brent settled at the lowest since July 19, while WTI was last cheaper on Aug. 9.

China's National Health Commission reported 42 new confirmed coronavirus cases on Aug. 16, marking a fifth straight day of falling case counts. The slowing infection rate suggests the widespread lockdowns seen in recent weeks have been effective at blunting the resurgent pandemic, analysts said.

But China's response to the delta variant outbreak has had a significant economic impact, raising concerns that rising case numbers in Europe and the US could herald a return of demand-depressing pandemic restrictions. China's industrial production rose 6.4% year on year in July, easing from a 8.3% hike in June, while retail sales growth eased to 8.5% in July from 12.1% in June, data from that country's National Bureau of Statistics Aug. 16 showed.

ANZ research analysts said mobility within China has dropped sharply in recent weeks as restrictions were enacted to curb more infections.

S&P Global Platts Analytics forecasts China's Q3 refinery throughput to drop to about 14.6 million b/d from 14.7 million b/d in Q2.

"The move lower continues to reflect concerns over the impact of the delta ware on oil demand, especially in emerging markets and China," according to Goldman Sachs analysts. "Our base-case remains that this will remain a transient demand hit, with structural supply underinvestment increasingly clear."

NYMEX September RBOB settled 3.53 cents lower at $2.1656/gal and September ULSD gave back 1.22 cents to settle at $2.0361/gal.

The US is also grappling with a resurgence in COVID-19 cases in several states with 11% of hospital beds nationwide occupied by COVID-19 patients, according to media reports. The country recorded 41,302 new cases and 104 deaths Aug. 16, according to its Centers for Disease Control and Prevention, with a seven-day moving average of 108,470 as of Aug. 15.

The impact of the delta spread on the US economy remains unclear. US industrial production climbed 0.9% in July, an increase for 0.2% in June, and the nation's industrial sector capacity utilization hit 76.1%, a 0.7 percentage point increase from the month prior and the highest reading since the start of the pandemic, Federal Reserve data showed Aug. 17.

But this strong manufacturing data was offset by a larger-than-expected decline in retail sales, which slid 1.1% in July, exceeding recent forecasts for a 0.3% slide.

Concerns that the continued rise in new cases could lead to travel restrictions in the US likely contributed to a weakening in gasoline cracks. The ICE New York Harbor RBOB crack versus Brent fell to $16.58/b in afternoon trading, down for a fourth straight session and on pace to close at the lowest since June 16.