Oil pointed downwards on this week’s first session on Thursday, as demand concerns return due to the rising COVID-19 infections related to the Delta variant. Such concerns ended a three-day rally in the energy commodity and Mexico has restored some oil production following a major outage.
Last week, American crude inventories fell for a third consecutive week and overall fuel demand increased to the most since March 2020, according to the U.S. Energy Information Administration (EIA) report.
By 0939 GMT, Brent crude fell 71 cents, or 1%, at $71.54 a barrel after rising 1.7% on Wednesday.
U.S. West Texas Intermediate oil dropped 78 cents, or 1.15%, at $67.58 a barrel. The benchmark gained 1.2% in the previous session.
Oil demand, however, is not entirely bullish. Capital Economics said in a note that for now, U.S. consumers appear to be shrugging off the spread of the Delta variant. However, it seems likely that they are near the peak in U.S. demand, which will act as a lid on oil prices, the note said.
The return of output in Mexico is also weighing on prices. Mexican state-owned petroleum company Pemex had so far recovered 71,000 bpd of production. Within a few hours, it expects to add an additional 110,000 bpd.
Ehsan Khoman, director at MUFG Bank said that push-and-pull factors have led oil prices to gyrate wildly in recent weeks. Looking ahead, the balancing of cyclical demand headwinds with structural supply tailwinds, leads them to remain neutral-to-bearish on oil prices for the rest of 2021, Khoman said.
Gold Down on Caution ahead of Fed Symposium
Investors were cautious ahead of a U.S. Federal Reserve symposium causing gold to go down on Thursday morning in Asia. They await the annual Fed symposium at the Jackson Hole, as it could provide cues to a timeline for asset tapering.
OANDA senior market analyst Edward Moya said that they’re probably going to see a continued consolidation in gold, but likely to the downside until they get past Jackson Hole.
By 12:16 AM ET (4:16 AM GMT), gold futures lost 0.10% to $1,789.15. During the previous session, they fell 0.7%, which was the biggest one-day decline in more than two weeks.
Meanwhile, holdings of SPDR Gold Trust (P:GLD) fell 0.3% to 1,001.72 tonnes on Wednesday. It was its lowest level since April 2020.
Silver was little changed at $23.85 per ounce, while platinum and palladium were down 1% and 1.5%, respectively.