New Covid-19 infections Slash Positions in Crude Futures

According to Reuters’ John Kemp, the continuing rise in Covid-19 infections in many parts of the world has increased traders’ concerns about the future of demand. This resulted in an outflow from oil futures contracts. Given the pandemic situation and the ongoing uncertainty surrounding jet fuel demand recovery, funds had cut their positions across the six major oil contracts for two of the last three weeks.

A refining executive was quoted by Reuters earlier this month, saying there were signs of a pickup in jet fuel demand. chief executive of Wet Coast refiner Par Pacific, Joe Israel, said, “Jet fuel demand numbers are starting to improve and show signs of life, allowing refiners to drop less jet into diesel which will eventually provide well-needed relief on distillate stock.”

Meanwhile, the EU is still struggling to control the disease, with cases increasing amid lockdowns and curfews in many areas of the continent. The Covid-19 infections are also increasing in the United States, which is even more concerning because, unlike the EU, the US has done better with vaccinations. The vaccination push in the United States has accelerated, with more than 4 million vaccinations a day during the last week.

Although, new cases have surpassed the average for July last year, with states reporting a total of 70,000 new diagnoses a day on average throughout the time. India is also experiencing a sharp increase in new infections, further complicating the outlook for crude. The news from India is especially depressing for oil bulls, as it is one of the key drivers of oil demand and one of the two main reasons prices rebounded after the worst of the pandemic.