Oil futures dipped July 17 as rising coronavirus cases prompted demand growth concerns, and global production is set to climb.
NYMEX August WTI settled down 16 cents at $40.59/b and ICE September Brent was 23 cents lower at $43.14/b.
The US reported over 77,000 new coronavirus infections July 16, a single-day record, according to Johns Hopkins University's Coronavirus Resource Center. The impact of the surge in new cases on oil demand is unclear. Some states, including Texas and California, have backtracked their reopening plans in a bid to slow the resurgent pandemic, but coronavirus hotspot Florida so far has shown no signs of instituting new lockdowns. Meanwhile, reopenings are continuing in less-afflicted states; New York City is set to move into Phase 4 July 20, as planned, bringing the entire state into the final phase of reopening.
"The virus situation is still bad in the US, but it doesn't seem like a return of harsh coronavirus lockdowns will happen," OANDA senior market analyst Edward Moya said. "WTI crude seems like it will continue to consolidate until a clearer picture of the demand outlook emerges."
NYMEX August ULSD settled 88 points lower at $1.2191/gal and August RBOB shed 94 points to close at $1.2245/gal.
The backwardation in front- to second-month NYMEX RBOB futures weakened to 1.54 cents/gal, the lowest since July 6. RBOB crack also retreated July 17. Platts prompt pipeline unleaded 87 crack against WTI fell to $6.775/b, the lowest since June 4, and the ICE New York Harbor RBOB crack versus Brent fell to $7.46/b, the lowest since June 1.
Amid uncertain demand outlooks, the market is also weighing the impact of rising OPEC production.
OPEC+ confirmed at its key July 15 Joint Ministerial Monitoring Committee meeting that it would begin tapering down production cuts by 2 million b/d from August to December, but overcompensation by past laggards means that the actual taper is expected to be about 1.1 million b/d.
OPEC+ officials have in recent days sought to assure the market that the easing of quotas by 2 million b/d will not create a flood of supplies, as they expect to consume much of the increased production domestically.
The Russian energy ministry has urged oil producers to send additional volumes to domestic refineries as output limitations under the OPEC+ deal ease starting August, deputy energy minister Pavel Sorokin said July 17.
