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Oil Down, Pauses Recent Rally as Investors Digest Easing U.S. Crude Oil Supplies

Oil was down Wednesday morning in Asia after its recent rally triggered by the loss of around a quarter of supply from Mexico and indications that China has brought its latest COVID-19 outbreak under control.

Brent oil futures fell 0.62% to $69.97 by 11:52 PM ET (3:52 AM GMT) and WTI futures were down 0.56% to $67.16.

Both Brent and WTI futures climbed around 8% during the past two days, clawing back most of the losses from a seven-day downhill trend. Concerns about the impact of COVID-19 outbreaks globally, which clouded the fuel demand outlook, contributed to the losses.

Sunday’s fire at an offshore oil platform operated by Petróleos Mexicanos (Pemex) slashed supply by around 420,000 barrels as of Monday.

In the U.S., the world’s second-largest oil importer, the American Petroleum Institute released its latest crude oil supply data on Tuesday. The data showed a draw of 1.622 million barrels for the week ending Aug. 20. Forecasts prepared by predicted a 2.367-million-barrel draw, while a 1.163-million-barrel draw was recorded during the previous week.

In Asia Pacific, there were signs that China, the world’s biggest oil importer, is bringing its latest COVID-19 outbreak under control. The country reported zero local symptomatic COVID-19 infections on Monday for the first time since the outbreak began.

ANZ commodity analysts pointed to a pick-up in traffic in Beijing and Shanghai as evidence of the Delta variant being "stamped out", ANZ commodity analysts said in a note.

"Nevertheless, improvements in the airline industry may lag amid some ongoing restrictions," with the loss of Mexican supply equal to planned output increases in August from the Organization of the Petroleum Exporting Countries and allies (OPEC+), the note added.

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