Oil up, but heads for a most significant weekly loss

Oil prices rose again on Friday but remained on course for their worst weekly drop since March, as travel restrictions imposed to combat the spread of the COVID-19 Delta variant raised fears about gasoline demand.

Brent crude oil prices were up 47 cents to $71.76 a barrel at 0640 GMT.  West Texas Intermediate (WTI) crude futures were up 45 cents to $69.54 a barrel. However, both contracts have given up 6% this week, the most since March.

The current price behaviour primarily results from the macroeconomic picture, Howie Lee, an economist at Singapore’s OCBC bank, agreed. The Delta variation is now truly hitting home, and risk aversion is evident in many markets, not just oil.

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Japan is preparing to extend emergency restrictions to further prefectures. China, the world’s second-largest oil consumer, has imposed restraints in some cities and halted flights, affecting gasoline consumption. At least 46 cities have issued travel advisories, and officials have delayed flights and shut down public transportation. That might impact oil demand as the summer travel season winds down, ANZ stated in a report. Every day something new is added. COVID- The number of cases in the United States has risen to a six-month high of 19. However, concerns over growing hostilities between Israel and Iran curbed the drop in prices.

According to CMC Markets analyst Kelvin Wong, oil prices are likely to be range-bound in the immediate term, with WTI trading between $66.30 and $75.70 per barrel. He added that improving crude supplies in the United States have also restrained oil’s upside, while non-farm payroll data anticipated later on Friday has imparted a cautious air to market.

China’s Gasoline

According to analysts, China’s fuel demand is on track to reach new highs this year because of a comeback in auto sales and growing domestic air travel.

Despite slowing growth in diesel, the primary industrial fuel, overall consumption of gasoline, diesel, and aviation fuel in the world’s top crude oil importer expect to rise by 7% to 11%. The record is between 8.4 million and 8.9 million barrels per day, according to analysts at consultancy SIA Energy, IHS Markit, and Energy Aspects.

In comparison, the International Energy Agency (IEA) forecasted China’s demand for gasoline, jet fuel in March. Diesel would increase by 6.5 per cent to 8.2 million BPD by 2021. China’s rapid increase in fuel consumption has contributed to a 50% increase in world crude oil prices by 2020.

Gasoline demand, which accounts for a quarter of China’s refined fuel consumption, is expected to climb 11% to 13% this year to a record 3.8 million to 4.1 million barrels per day.