Crude oil futures rise on bargain hunting, but pandemic concerns remain

0357 GMT: Crude oil futures were higher in mid-morning trade in Asia Aug. 20 amid bargain hunting by investors after a sixth straight session of decline in US trade overnight, although the upside was expected to be limited as delta variant outbreaks in key oil-consuming economies and US Federal Reserve signals weighed on the demand outlook.

At 11:57 am Singapore time (0357 GMT), the ICE October Brent futures contract was up 32 cents/b (0.47%) from the previous close at $66.77/b, while the NYMEX September light sweet crude contract was 34 cents/b (0.53%) higher at $64.03/b.

"Crude oil prices rebounded slightly on Friday morning as the US Dollar retreated from an eight-month high. Yet the overall trend for oil remains bearish-biased," Daily FX Strategist Margaret Yang told S&P Global Platts Aug. 20.

"WTI has declined six days in a row, falling 8.3%. This may encourage some short-term bargain hunting," she added.

However, market watchers doubted the price rebound could be sustained.

"The delta variant is casting the biggest cloud over the oil market. The recent outbreaks have raised concerns about the sustainability of the economic recovery," ANZ Research analysts in a note Aug. 20.

"Although oil demand is expected to slow, it won't cut off the path to normalization... Demand in Europe and the US remains robust, as mobility continues to improve. Overall, this should see the market remain tight, with rising vaccination rates to lead to an improvement in sentiment in the latter part of the year."

Several analysts noted that crude futures last fell for six consecutive sessions in February 2020, in the lead-up to pandemic lockdowns across the globe.

"WTI crude's six-day losing streak seems a bit overdone but for it to stop, it might need a sign from OPEC+ that they might hold off on plans to ramp up output," OANDA senior market analyst Edward Moya said in a note.

"The bottom could be nearing here for crude, but energy traders will need to see some positive headlines regarding global economic growth."

The US reported 157,694 new COVID-19 cases Aug. 18, US Centers of Disease Control and Prevention data showed, while the seven day moving average stood at 133,055 cases.

"Visions of the US economy being fully reopened and with kids attending school in person might have several disruptions. Many individuals are coming down with COVID-19, making a complete return to work unlikely as many families have unvaccinated children," Moya said.

In addition, the US Federal Reserve has signaled it could start tapering bond purchases as early as September, which could spur a rise interest rates and add to downward pressure on energy demand in coming months.