WTI and Brent to surge higher towards $80 when Delta worries dissipate – TDS
Growing worries surrounding new mobility restrictions in China tied to the Delta variant, OPEC+ supply increases for August and weakening export activity all helped to drive WTI and Brent Crude Oil down. While additional downside risk is possible, strategists at TD Securities see oil as a buying opportunity after rout.
WTI to find strong support near the $65 level
“The petroleum complex will continue to show weakness for as long as the risks from new COVID-19 breakouts are not well defined. However, we also believe that the impact on petroleum product demand may not be as severe as some fear, owing to the fact the world has gotten used to dealing with COVID-19 outbreaks, and that much of the Western world is becoming better protected with vaccines. This includes the US, as vaccine distribution is likely to grow.”
“OPEC+ supply discipline, seasonality and consumption growth should deliver deficit conditions into Q3, albeit smaller than previously predicted. In addition, judging by the large gasoline inventory draws of late, refiners should boost crude uptake in the next month or so, as they compensate for a period of low utilization rates. Recovering cracks should be supportive for the crude market. As such, WTI crude is likely to find strong support near $65/b.”
“With demand likely still increasing rapidly into Q3-2021 and shale supply hindered by the lack of meaningful capital expenditure growth, the proposed production increase by OPEC+ imply a deficit market over next couple months, provided that the spread of COVID does not catalyze widespread lockdowns.”
“We believe that the crude market could see prices spike when Delta worries moderate, with WTI and Brent looking toward $80/b again.”
Reference: FXStreet
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