News

Weekly decline in oil set

  • 20 August, 2021
  • 12:04 pm EEST

The Federal Reserve’s path toward halting asset purchases, a rebound in the US currency, and concerns about global energy demand all contributed to oil’s significant weekly loss.

The Federal Reserve’s path toward halting asset purchases, a rebound in the US currency, and concerns about global energy demand all contributed to oil’s significant weekly loss.

Despite the development of the delta coronavirus type, oil has been battered this month by the likelihood of the Fed reducing its unprecedented monetary support. The pandemic continues to pose a danger to energy consumption, particularly in Asia, with China, a major importer, restricting mobility to fight an epidemic.

Crude’s bout of weakness, which follows a powerful rally in the first half, may prompt OPEC+ to pause its next planned production increase, according to Citigroup Inc. The 23-nation group led by Saudi Arabia and Russia is scheduled to meet to assess the state of the market on Sept. 1. At present, members are due to add another 400,000 barrels a day of supply next month.

According to Wayne Gordon, a strategist at UBS AG Wealth Management, this was a risk-off week defined by concerns over the delta variant, mixed activity statistics from China, a stronger currency, and the fear that the US central bank could taper rapidly. “From current levels, the downside is limited,” he said.

Prices:

  • WTI for September delivery, which expires later on Friday, rose 0.4% to $63.96 a barrel on the New York Mercantile Exchange at 6:53 a.m. in London.
    • The more-active October contract gained 0.4% to $63.75.
  • Brent for October settlement added 0.3% to $66.66 a barrel on the ICE Futures Europe exchange.

The dollar hit the highest level since November following the Fed’s move. That makes commodities including crude more expensive for overseas buyers. Oil’s drop this week was matched by retreats in copper and other raw materials.

Following the Fed’s decision, the dollar rose to its highest level since November. As a result, commodities such as crude become more expensive for international customers. The reduction in oil prices this week was mirrored by falls in copper and other raw commodities.

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 delta spreads.

Brent’s prompt timespread firmed this week, even as headline prices fell. It was 47 cents a barrel in backwardation on Friday, from 37 cents on Monday. That’s a bullish pattern, with near-dated prices above later-dated ones.

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