0317 GMT: Crude oil futures were higher during mid-morning trade in Asia July 27 as a weakened US dollar prompted buying activity, but upside was limited as the rising number of COVID-19 cases globally sapped market sentiment.
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At 11:17 am Singapore time (0317 GMT), the ICE September Brent futures contract was up 46 cents/b (0.62%) from the previous close at $74.96/b, while the NYMEX September light sweet crude contract rose 35 cents/b (0.49%) at $72.26/b. The ICE Brent and the NYMEX light sweet crude markers had edged up 0.54% and down 0.22%, respectively, on July 26, following a directionless trading session.
The uptick in prices comes amid the depreciation of the US dollar ahead of the US central bank's Federal Open Market Committee meeting, with the ICE US dollar index trading at 92.61 at 11.00 am, down 0.35% from the July 23 close.
A weaker US dollar makes dollar denominated assets such as oil futures more attractive for buyers holding foreign currency, and whips up appetite for such assets.
Meanwhile, analysts said the rapid spread of the delta variant of the coronavirus has created significant downside risk for the oil market, as it has raised the prospect of extended and more stringent mobility restrictions.
Citing the spread of the delta variant both domestically and internationally, US White House press secretary Jen Psaki said on July 26 that the country will maintain its existing coronavirus travel restrictions, resisting pressure from the travel industry and US allies to ease them, media reports said.
The US has seen its seven-day moving average of COVID-19 cases triple in July to 51,939 as of July 25, latest data from The New York Times showed.
A similar trend of rising cases has been seen all over the world, including in the UK, which boasts one of the highest vaccination rates in the world. Chancellor Angela Merkel's chief of staff, Helge Braun, said July 25 that COVID-19 infections in Germany could surge to 100,000 a day in two months unless more people get vaccinated.
"New COVID-19 cases have been rising in Asia for a few weeks now, but sentiment in the oil market is starting to deteriorate as infections rise in the heavy energy-consuming countries of the west," Avtar Sandu, senior commodities manager at Phillips Futures, said July 27.
Analysts surveyed by S&P Global Platts expect a 0.8% uptick in the US' refinery utilization to have sent the country's overall commercial crude oil stocks 2.5 million barrels lower to 437.2 million barrels in the week ended July 23.
US refined product inventory draws are also expected to have fallen in the week ended July 23, analysts said, with total gasoline stocks seen 1.3 million barrels lower at around 235.1 million barrels and distillate stocks 1.6 million barrels lower at 139.4 million barrels.
The market will be awaiting comprehensive inventory data from the American Petroleum Institute and the Energy Information Administration due to be released July 27 and 28, respectively.