Oil headed for the biggest weekly loss since mid-March as a resurgence of Covid-19 threatened the outlook for global fuel demand demand.
Futures traded around $72 a barrel in New York, and are heading for a weekly decline of 3.4 per cent. The fast-spreading delta variant is triggering renewed restrictions on movement as it sweeps across the globe, eroding fuel consumption in several Asian countries that had buoyed the recovery.
At the same time, crude markets face the prospect of extra supplies from the OPEC+ coalition, as the United Arab Emirates and Saudi Arabia repair a rift that has stymied the group’s decision-making process.
Price picked up on Friday as the dollar gave up some of this week’s gains, boosting the appeal of commodities priced in the U.S. currency.
Amid the concerns over demand, the structure of U.S. crude prices has faltered. While there’s still a premium on the most immediate contracts – a condition known as backwardation that signals tight supplies – it has eased significantly in some parts of the forward curve. The prompt premium stands at just 22 cents a barrel, from 75 cents a week ago.
“Oil prices have been under pressure,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “We could quickly end up with too much oil being placed on the market.”
- West Texas Intermediate for August rose 0.5 per cent to $72 a barrel on the New York Mercantile Exchange at 11:05 a.m. in London after sliding two per cent in the previous session.
- Futures are down 3.4 per cent this week.
- Brent for September settlement gained 0.4 per cent to $73.78 on the ICE Futures Europe exchange after losing 1.7 per cent on Thursday.
- Futures are down 2.3 per cent this week, set for third weekly loss.
- The prompt timespread for Brent was at 68 cents in backwardation, compared with 81 cents a week earlier.
- The Bloomberg Spot Dollar Index climbed to the highest level since early April on Tuesday.
Still, crude has rallied almost 50 per cent this year as the vaccine rollout helps restore economic activity, and forecasters from the International Energy Agency to Citigroup Inc. predict that the market will get tighter in coming months. The Organization of Petroleum Exporting Countries itself expects the recovery in demand for its crude will continue into next year.
© 2021 Bloomberg L.P.