Crude oil futures were higher during mid-morning trade in Asia Aug. 18 following the decline in US inventories, as per the American Petroleum Institute's latest data, but the upside was capped by a stronger US dollar and prevailing concerns over the spread of the COVID-19 delta variant.
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At 12.30 pm Singapore time (0430 GMT), the ICE October Brent futures contract was up 24 cents/b (0.34%) from the previous close at $69.27/b, while the NYMEX September light sweet crude contract was up 23 cents/b (0.34%) at $66.86/b.
US crude inventories declined by about 1.16 million barrels for the week ended Aug. 13, latest data from the API showed, while China, the world's largest energy consumer, has reported that its daily crude processing in July had dived to its lowest in nearly 15 months. The API data also showed that gasoline inventories declined by about 1.2 million barrels last week, compared with a 1.1 million-barrel draw the prior week.
However, analysts said further upside was capped by a stronger US dollar as disappointing economic data from China and the spread of the delta variant weighed on the risk appetite for commodity prices.
"The strengthening of the dollar has potentially added to the downward pressure of the oil prices," said Vandana Hari, CEO at Vanda Insights on Aug 18, added that oil prices has been impacted by the outbreak of delta variant which has created significant downside risk for the oil market. Despite the grim situation, she expects the impact of the delta variant to be short lived and fall of the oil prices could be nearing its bottom.
ANZ research analysts said that poor data out of China remains a concern as mobility in key cities such as Beijing has been curtailed by authorities trying to curb the outbreak.
S&P Global Platts Analytics has also forecasted China's Q3 refinery throughput to dive 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."