Crude extends rally, climbs 3% on improved demand sentiment

Crude oil futures pushed higher for a second session Aug. 24, climbing 3% on the back of improved demand sentiment and a weaker US dollar.

NYMEX October WTI settled $1.90 higher at $67.54/b and ICE October Brent climbed $5.41 to $71.05/b.

"The oil market is still very tight and with Chinese demand picking up, crude prices only have one way to go after an overdone selloff," OANDA senior market analyst Ed Moya said in a note. "Crude prices should benefit from declining inventories and as the world's two largest economies start to see a return of normal crude demand."

NYMEX September RBOB was up 5.76 cents on the day to settle at $2.1808/gal and September ULSD rallied 6.17 cents to $2.0668/gal.

China's National Health Commission reported a single new locally transmitted case of COVID-19 Aug. 24, after having reported zero the day prior. The nation's progress against the outbreak has fueled cautious optimism that the country will dial back its strict mobility curbs.

The slowdown in cases in China has offered hope that the world's largest crude importer will see a demand recovery similar to that of India, the world's third-largest importer. Indian energy demand has steadily increased since mid-May as the country eased curbs on vehicular movements enforced during an April COVID-19 surge.

In July, India's demand for oil products rose 3% from June and was up 7.9% year on year at 16.8 million mt, or 4.3 million b/d, the oil ministry said Aug. 24. The average run for all categories of refineries in India rose to 91% in July compared with 90% in the previous month, reflecting the highest run in three months.

Meanwhile, the US Food and Drug Administration on Aug. 23 issued full approval for the Pfizer-BioNTech's coronavirus vaccine for individuals 16 and older, paving the way for more expansive vaccine mandates.

The FDA approval of the Pfizer vaccine comes as the US sees its vaccination rates surge more than 70% month on month as case numbers and hospitalizations rise, according to media reports. The US Centers for Disease Control and Prevention reported a seven-day moving average of 731,854 vaccinations administered Aug. 18, compared with 467,346 in the same period a month earlier.

The ICE New York Harbor RBOB crack versus Brent rallied to $15.23 in afternoon trading, on pace to snap a nearly two-week down streak that has seen it retreat from a high of $18.81/b on Aug. 11.

Oil found further support from a weaker US dollar. The ICE US dollar Index fell to 92.897 in afternoon trading, down from 92.958 Aug. 23 and on track for a six-session low.