Oil heads for longest run of losses since March on virus, dollar

Oil fell for a fourth day, heading for the longest run of losses since March, on the threat to demand from the delta coronavirus variant.

West Texas Intermediate futures declined 0.4 per cent after losing almost 3 per cent over the previous three sessions. US gasoline consumption fell for a third week, according to a survey by Descartes Labs, while data from China on Monday revealed a slowdown in the economy last month.

Further downside pressure came as a strengthening dollar made commodities priced in the currency more expensive.

“The ongoing battle against the latest virus outbreak is showing up in economic data, and when the reading is disheartening in the world’s second-biggest economy investors take notice,” said Tamas Varga, an analyst at PVM Oil Associates Ltd.

After a vigorous rally in the first half of the year, crude’s advance has been checked in recent weeks. The delta variant has spurred fresh curbs on mobility in many nations including China, harming energy consumption. Against that backdrop, JPMorgan Chase & Co. has been among banks reducing oil price forecasts.

Prices:

• WTI for September delivery lost 27 cents to $67.02 a barrel as of 10.21am London time
• Brent for October fell 25 cents to $69.26 a barrel
  • The benchmark grade’s prompt timespread was 37 cents a barrel in backwardation, down from 62 cents a month ago, showing emerging concerns about oversupply

While demand has been challenged, the Organization of Petroleum Exporting Countries and its allies including Russia have stayed the course in relaxing their output curbs imposed in the early phase of the pandemic. Supplies will rise by 400,000 barrels a day this month.

With prices softening OPEC+ delegates said they don’t see a need to accelerate the revival of output, despite a call from US President Joe Biden last week for the cartel to restore more production to bring gasoline prices down. The group’s next regular meeting is set for Sept. 1.

Still, Goldman Sachs Group is standing by a forecast that Brent will hit $80 a barrel next quarter amid a sustained supply deficit as it expects delta’s hit to consumption to be transient.