Oil futures ended higherTuesday, bouncing after holding support above the July lows seen in a sharp selloff during the previous session which was blamed partly on fears the global spread of the delta variant of the coronavirus that causes COVID-19 would dent energy demand.
“Crude prices are rebounding as the rout that stemmed from delta variant concerns has run its course,” said Edward Moya, senior market analyst at Oanda, in a note.
The bounce came as investors across asset classes appeared to welcome Senate passage of aninfrastructure package, sending it to the House of Representatives.
“The headlines for crude have been mostly constructive, but the primary driver has been the overall risk-on theme that stemmed from Senate’s passing of the $1 trillion bipartisan infrastructure spending bill,” Moya said.
West Texas Intermediate crude for September delivery
rose $1.59, or 2.3%, to finish at $70.63 a barrel on ICE Futures Europe.
The bill, known as the Infrastructure Investment and Jobs Act, calls for $550 billion in new public-works spending above what already was expected in future federal investments, including $110 billion for roads, bridges and other projects, as well as $66 billion for rail, $65 billion for broadband internet and $55 billion for water systems.
WTI and Brent fell by more than 4% at session lows Monday before trimming losses, closing at their lowest levels since July 19. Moves by China, the world’s largest oil importer, to restrict business and consumer activity in an effort to contain low but growing numbers of delta-variant cases were cited as a reason for the selloff.
Worries about demand from China extended beyond oil, with some economists arguing that a cooling of the country’s appetite for a range of commodities was likely here to stay.
Moves by U.S. companies to delay planned returns to the office were also a factor, analysts said.
But the July WTI contract managed to close Monday above the July low at $66.41, marking that level as a “‘line in the sand’ for the oil market,” said Tom Essaye, founder of the Sevens Report, in a note.
“If support holds, which it likely will as long as the news flow regarding COVID does not continue to materially deteriorate, then WTI will remain rangebound between aforementioned support at $66 and resistance from July at $75 a barrel,” he said.
Investors will also pay close attention to weekly storage data, with the American Petroleum Institute expected to provide its take late Tuesday afternoon. The Energy Information Administration will release official data on inventories Wednesday morning.
Analysts surveyed by S&P Global Platts, on average, look for the EIA data to show U.S. crude supplies fell 600,000 barrels last week, while gasoline inventories are seen down 2.4 million barrels and distillates down 600,000 barrels. Refinery utilization is forecast to rise to 91.6% in the week ended Aug. 6 from 91.3% the previous week.
September natural gas
closed at $4.0890 per million British thermal units, up 0.7%.