Delta Steers Oil Bulls Toward Exit

The October futures contract for global oil price benchmark Brent started August at a high of $75.39 per barrel. That same contract hit a fresh low of $65.06/bbl on Friday as fears of impact of the Covid-19 Delta variant on oil demand growth continued to build. On Friday, the October Brent futures contract fell by $1.27 to close at $65.18/bbl -- the seventh consecutive daily decrease -- leaving Brent down $5.41 from where it began the week (IOD Aug.16'21). Oil prices had already run ahead of themselves in July, when bullish sentiment reached its highest levels since 2012, noted Walter Zimmermann with Icap Technical Analysis. After Brent touched nearly $80/bbl at the beginning of July, the bulls ran out of buying power and bets on higher prices dwindled. With bulls now offloading and oil prices falling, traders question what is next for Brent, which sees still fundamental price and inventory signals that imply a tight physical market. For Zimmermann, the direction is clear: Brent can fall as low as $40 if bears push Brent below $63.24/bbl, and “that level is slowly but inexorably getting closer and closer.” Banks and funds cite the spread of the Delta variant and its negative impact on the economic recovery from the first year of the pandemic. “The world economic upward bounce has slowed down,” said Albert Helmig with consultancy Grey House, pointing in particular to China’s economy. Not So Nice