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Oil prices rebounded modestly today but were far from able to reverse yesterday’s bloodbathery as delta variant (demand) scares combined with OPEC+’s production deal (supply) dominated any equity-exuberance spillover affect with WTI unable to get back above $68.

“It is hard to see prices staging a comeback unless virus jitters are brought back under control,” said Stephen Brennock of oil broker PVM.

“The market is clearly unsettled about the demand outlook.”

Behind the burst of volatility is a realization that vaccines won’t prevent episodic flare-ups in infection and the introduction of measures to control new variants, according to Marwan Younes, chief investment officer at Massar Capital Management, a commodities-focused hedge fund.

“It’s going to be a lot more turbulent than people expected,” he said.

And the next driver of that vol will be tonight’s inventory data

API

• Crude +806k (-5.4mm exp)

• Cushing -3.57mm

• Gasoline +3.31mm

• Distillates

Analysts expected a 9th straight weekly crude draw but were disappointed when API reported a 806k barrel build. Gasoline stocks also saw a decent build.

Source: Bloomberg

WTI traded around $67.50 ahead of the print, and dived lower to a $66 handle after the surprise crude build…

“There are bottom pickers trying to get into this dip,” said Bob Yawger, director of energy futures at Mizuho in New York.

Analysts at Goldman Sachs Group say that the extra barrels of oil promised by OPEC won’t be enough to plug the gap between production and recovering demand. They see Brent, the global benchmark, trading at an average of $80 a barrel in the fourth quarter, though they warn of the potential for prices to “gyrate wildly in the coming weeks.”