WTI, Brent Up 1% Month-Over-Month Despite COVID, Slower Growth

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Despite growing signs of a resurgent pandemic and slowing economic growth in the United States and Asia, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled the last trading day of July higher and advanced more than 1% on the month, with oil traders shrugging at concerns over a derailed demand recovery.

Several manufacturing hubs in China, Vietnam and Cambodia this month reinstated quarantine restrictions to slow the spread of a highly infectious Delta variant that has further rattled already strained supply chains of key raw materials and parts.

Manufacturing economies across the globe, including Germany and the United States, saw their industries slowing production this month amid shortages of supplies and available labor. Germany's economy -- Eurozone's manufacturing powerhouse -- rebounded 1.5% in the second quarter after a 2.1% contraction in the first three months of the year, although economists expected a stronger growth rate of 2%.

Domestically, second-quarter gross domestic product widely missed expectations with a 6.5% growth rate versus an expected 8.5% expansion. Ahead of Thursday's publication of the data, the quarter's expansion was seen by economists as marking the peak of U.S. post-pandemic recovery.

Weaker-than-expected economic data comes on the heels of a resurgent pandemic across key centers for global oil demand. U.S. new daily infections jumped to 106,818 as of July 27, up from 4,087 four weeks ago, according to the data from Centers for Disease Control and Prevention. CDC reinstated this week indoor mask mandate in areas with "high" or "substantial" COVID-19 transmission. Even more alarming, CDC study found that 74% of people infected in a COVID outbreak in Massachusetts were fully vaccinated, carrying as much of the virus in their nose as unvaccinated people.

"This finding is concerning and was a pivotal discovery leading to CDC's updated mask recommendation," CDC Director Dr. Rochelle Walensky said in a statement.

Walmart and Apple are among other large businesses that will begin requiring masks for store workers in high-risk counties in the United States as determined by the latest CDC rankings, effective immediately.

These restrictions could be a precursor to potential demand weakness in the fall and winter months should COVID-19 infections accelerate, slowing the global economy.

Consumer sentiment data released this morning by the University of Michigan showed Americans increasingly worried about the virus along with rising inflation.

"The largest monthly declines remained concentrated in the outlook for the national economy and complaints about high prices for homes, vehicles, and household durables. While most consumers still expect inflation to be transitory, there is growing evidence that an inflation storm is likely to develop on the not-too-distant horizon," said Surveys of Consumers Chief Economist Richard Curtin.

On the session, NYMEX September West Texas Intermediate gained $0.33 to settle at $73.95 barrel (bbl), while gaining 1.2% on the month, and ICE September Brent futures expired $0.28 higher at $76.33 bbl. October Brent futures settled at a $0.92 discount to the September contract at $75.41 bbl. NYMEX August RBOB contract gained 1.45 cents to expire at $2.3659 gallon and next-month delivery September futures expanded its discount to the expiring contact to 3.12 cents gallon with a 2.3347 settlement. NYMEX August ULSD contract expired at $2.1994 gallon for a 1-cent gain, with September futures settling at $2.1956 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges