By Barani Krishnan
Investing.com - Crude prices fell a second day in a row on Tuesday, with market bulls counting on U.S. inventory data due after settlement hours to prop up sentiment deflated by a rash of new Covid infections across the world.
New York-traded West Texas Intermediate crude, the benchmark for U.S. oil, settled down 70 cents, or almost 1%, at $71.26 per barrel. That was in addition to Monday’s tumble of 3.6%, which was WTI’s sharpest one-day fall since July 16.
London’s Brent, the global benchmark for oil, settled down 48 cents, or 0.7%, at $72.41 per barrel. On Monday, Brent lost 3.3%.
Oil has been down since the start of the week after growth in China's factory activity progressed at its slowest since April 2020 amid new Covid cases from the more transmissible Delta variant of the virus.
China had largely managed to control the Covid-19 virus since the initial outbreak, helping to underpin a strong economic recovery from the pandemic, greatly contributing to the broader rebound in oil.
However, it is now implementing a wave of travel restrictions and quarantine orders at a level not seen since the initial outbreak. Wuhan, where the virus was first reported in 2019, reported three new locally transmitted cases on Monday after more than a year, prompting the authorities to test the city’s 12 million residents amid fears the Delta variant of the virus will quickly take hold.
Covid cases are also rising in the United States, with the Centers for Disease Control and Prevention reporting 72,000 new cases per day in the United States over the weekend, a 44% increase over the previous week and higher than the peak set in the summer of 2020.
“Things are going to get worse” as the delta variant fuels a surge in cases, according to U.S. infectious-disease expert Dr. Anthony Fauci earlier this week. However, he did not expect the U.S. to lock down businesses again, which means this outbreak would have less of an impact on U.S. oil demand.
Oil bulls, meanwhile, hope that inventory data due later in the day from the API, or American Petroleum Institute, will bolster sentiment.
API will issue at 4:30 PM ET (20:30 GMT) a snapshot of U.S. crude, gasoline and distillate inventories for the week ended July 30. The figures serve as a precursor to the official weekly inventory data due on Wednesday from the EIA, or U.S. Energy Information Administration.
According to a consensus of analysts tracked by Investing.com, U.S. crude crude stockpiles likely fell by 3.1 million barrels last week, versus the previous week’s draw of 4.1 million.
Gasoline inventories potentially fell by 1.78 million barrels versus the drop of 2.25 million the prior week, consensus shows.
But stockpiles of distillates, made up of diesel and heating oil, likely slid by 543,00 barrels last week after declining by 3.1 million the week before.