Oil fell after four monthly gains as data signaled a slowdown in China and investors monitored the spread of the delta coronavirus variant.
West Texas Intermediate slipped 0.6%, after climbing 2.6% last week. China’s economic activity continued to ease in July, implying a more steady recovery into the second half as growth risks mount. Minneapolis Federal Reserve President Neel Kashkari said the spread of the delta variant could keep some Americans from looking for work, potentially harming the U.S. rebound.
While futures dipped, traders also monitored an uptick in tensions between Iran and the U.S. Washington has formally blamed Tehran for an attack on an Israel-linked oil tanker, warning of an “appropriate response”. The standoff comes as the two nations are seeking to revive a nuclear accord that, if successful, may pave the way for an end to U.S. sanctions on official Iranian oil flows.
Oil has risen every month this year apart from March as the global economic recovery from the pandemic stoked consumption, although traders remain wary about the threat carried by the disease’s persistence. With activity picking up, stockpiles held at the key Cushing hub in Oklahoma have hit the lowest level since January 2020. Against that backdrop, the Organization of Petroleum Exporting Countries and its allies have followed through with plans to ease supply curbs, with an extra 400,000 barrels a day to be released this month.
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The highly infectious delta variant continues to spread rapidly in parts of Asia, clouding the outlook for mobility. Thailand is set to expand its quasi-lockdown measures to regions that are home to about 40% of the population. China is studying if it’s necessary to give booster shots to groups such as the elderly.
Brent’s prompt timespread was 82 cents a barrel in backwardation, a bullish pattern with near-dated prices trading above later-dated ones. The gap was 88 cents a barrel on the first trading day of July.