Oil headed for its longest stretch of declines since 2019 as the Federal Reserve’s signal it will start tapering stimulus promoted a rally in the dollar, while concerns continue to mount about global energy demand.
West Texas Intermediate futures fell for a seventh day, taking the week’s drop to 8.9 per cent. Other raw materials including copper and iron-ore fell on Thursday following the Fed’s signal. The Bloomberg Dollar Spot Index has risen every day this week, making commodities priced in the currency less appealing.
Oil has been hit this month by the prospect that the Fed will cut back on its asset purchases even as the delta coronavirus variant endangers the economic revival. The pandemic remains a threat to energy demand, especially across Asia, with key importer China restricting mobility to combat an outbreak.
Crude’s bout of weakness comes as expectations ease for further large inventory draws in the coming months. Bank of America said prices will probably be range-bound in the second half of the year as the delta variant continues to spread, with more steep drops in stockpiles unlikely. The price plunge may force OPEC+ to pause its next planned production increase, according to Citigroup Inc.
“We have now priced down to a level reflecting more sideways inventories, with demand pain from COVID-19 together with more from OPEC+ on supply,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “But OPEC+ should be in fairly good control of the market still.”
- WTI for September delivery, which expires Friday, fell 2.1 per cent to $62.36 a barrel by 8:31 a.m. in New York
- Prices are in the longest losing streak since October 2019
- Brent for October settlement declined 1.8 per cent to $65.23 a barrel
- Brent is down for a seventh day, its longest run of losses since February 2018
The pandemic continues to disrupt plans to restart economic activity, crimping mobility and demand for fuels. In Australia, Sydney’s two-month long lockdown will be extended until at least the end of September. In the U.S., more companies announced plans to keep workers at home as the virus spreads.
© 2021 Bloomberg L.P.