Brent prices fell for a fourth day, with Brent sliding for the first time in two weeks through $70 a barrel on the risks of demand as a result of the delta virus variant, particularly in China.
Traders are worried about the impact of a fresh batch of curbs to combat the highly infectious strain of the virus. Adding to the bearishness, U.S. oil inventories also posted a surprise increase last week, the Energy Information Administration reported Wednesday. In the past several days, key spreads for the market's main benchmark crudes have slumped sharply, pointing to a less optimistic reading of the market among traders and investors.
Oil has sunk as optimism over a continued recovery from the pandemic has been challenged by delta's spread. The puncturing of that more positive narrative comes as the Organization of Petroleum Exporting Countries and its allies push on with easing the supply curbs they imposed last year.
'Crude is showing tentative signs of bottoming out, but the losses forced by delta-led demand concerns this week may not be easily reversed, said Vandana Hari, founder of Vanda Insight in Singapore. 'Thanks to an unexpected buildup in crude stocks, the EIA data failed to provide the support crude so badly needed.
The situation in China is worsening. There were 62 additional Covid - 19 cases in the National Health Commission on Wednesday, as well as confirmed infections asymptomatic, according to the National Health Commission. The authorities have imposed new travel and movement restrictions, including in Beijing's capital, Beijing. Hong Kong re-imposed quarantine on travelers from the mainland, though an exception remained for the southern Guangdong province, a neighbor to the financial hub.
There was additional negative news of Australia. In Melbourne state, the city of Victoria will go back into lockdown, its sixth since the start of the pandemic.
The so-called weakening timespread, the gap between the most immediate futures contract and those that were completed a month later, is indicating a prompt market. Stock market WTI stands at a premium of about 40 cents a barrel to second month, lower than the 75 cent price at the beginning of August, according to Nymex data. The Brent equivalent has seen a similar retreat.
The Crude drop on Wednesday came amid a broad decline in commodities after a senior Federal Reserve official suggested the U.S. central bank is on track to pull back the massive support it provides to the pandemic-damaged economy. That raised the dollar, hurting raw materials priced in the currency.