​Oil kept afloat by weak dollar with physical market stuttering

Oil edged lower on signs that market fundamentals are getting shakier, though there was broader support from the recent slide in the dollar.

Futures in New York declined toward $41 a barrel. The market’s structure tumbled on Monday in London and the Middle East, and the value of physical crude barrels in key regions has weakened. Russia’s Urals oil is being offered at three-month lows, and key swaps tied to the North Sea crude that prices much of the world’s oil have also slipped.

Nervousness is increasing as the OPEC+ alliance prepares to taper cuts from next month at the same time as the pandemic stages a comeback in countries from China to Spain to Germany. A gauge of dollar strength fell to the lowest level since September 2018, providing more support for oil that’s priced in the U.S. currency.

“Compared to the March to May period, it is almost like we are sailing a sea of tranquility,” said Harry Tchilinguirian, oil strategist at BNP Paribas SA. “A let-up in Chinese demand appears to be more readily reflected in the shape of the oil curves than necessarily in the flat price.”


  • West Texas Intermediate for September delivery fell 0.5 per cent to $41.41 a barrel as of 10:10 a.m. in London
  • Brent for September was steady at $43.42

Brent’s September futures were 47 cents cheaper than for October, compared with a 23 cent discount a week earlier. The difference between the front- and second-month price is known as the prompt timespread. The same spread for both WTI and Dubai crudes has weakened, another sign of the easing in the physical market.

China, meanwhile, continues to lag behind the pace of U.S. imports needed to meet the terms of the two nations’ trade deal, amid a worsening diplomatic standoff that’s sparking global fears of a new Cold War. Purchases of energy products are only at about five per cent of where they need to be by year-end.

© 2020 Bloomberg L.P.

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