Demand hopes rise as delta fades. WTI up $1.80 to $70.40.
The pace of US covid hospitalizations fell yesterday for the first time in this wave. Globally, cases are also showing more signs of a slowdown.
Even with the pandemic raging in the US, this week's EIA report showed record demand at 23 million barrels per day. That was hardly with any positive contribution from gasoline.
The bad news is that flight demand and mobility are showing negative signs but that may clear up alongside delta as well.
The supply side is probably a bigger driver at the moment. Major portions of Mexican production and US gulf production remain offline. Beyond that, oil companies are showing little willingness to drill except in the best basins.
Here's a compelling chart showing that oil US permian shale production is back to pre-covid levels with other basins in an ongoing decline (some of which I fear is terminal).
Forecasting post-pandemic oil demand is a tough exercise but if the latest US numbers are an indication, it could overshoot. OPEC could later adjust to try and balance the market but if covid fades, we could be in a situation next year where all the taps are open and there's a supply deficit. That would be a recipe for $100 oil.
Moreover, here's a new report showing surging Indian demand for oil and new cars.
Technically, the oil chart is also interesting. It's not perfect, but you could draw an inverted head-and-shoulders pattern on the daily chart and that would target well above $80. The break of the $69.96 high from August 12 and the $70 psychological mark today are also bullish signs.
I highlighted the bull case for crude yesterday.