U.S. West Texas Intermediate and international-benchmark Brent crude oil futures closed lower on Friday as money-managers dumped the commodity in anticipation of weaker COVID-related global fuel demand, a stronger U.S. Dollar, worries of a slowdown in the economic recovery in the U.S. and China and increasing U.S. supply.
On Friday, October WTI crude oil futures settled at $62.14, down $1.36 or -2.14% and October Brent crude oil futures finished at $65.18, down $1.27 or -1.95%. In addition to the lower close, the markets posted their seventh consecutive day of losses and their largest weekly loss in more than nine months.
Delta-Variant Coronavirus Surge Expected to Weigh on Demand
Crude prices are struggling to find support and buyers as restrictions and lockdowns threated global demand. China has imposed stricter disinfection methods at ports, causing congestion, nations including Australia have ratcheted up travel restrictions, and global jet fuel demand is softening after improving for most of the summer, according to Reuters.
China, the world’s largest crude importer, has imposed new restrictions with its “zero tolerance” coronavirus policy, which is affecting shipping and global supply chains. The United States and China have also imposed flight-capacity restrictions, Reuters reported.
Rising Greenback Pressuring Demand for Dollar-Denominated Crude
The U.S. Dollar hit a nine-month high on signs the U.S. Federal Reserve is considering reducing stimulus this year. Oil prices move inversely to the U.S. currency, making oil more expensive for foreign purchasers when the dollar rallies.
Brent/WTI Price Spread is Narrowing – A Sign of Plenty of Supply
Futures contracts suggest that the market expects plenty of supply in coming months. The premium for the front month Brent contract over the third-month contract has nearly halved between late July and now, indicating that near-term supply will not be as tight as the market had expected.
OPEC is expected to contribute to the rise in supply by gradually lifting production levels, although they could decide against this at its September meeting.
Meanwhile, U.S. production rose to 11.4 million barrels per day in the most recent week, and drilling firms added more rigs for the third week in a row.
US Oil and Gas Rigs Rise for Third Week – Baker Hughes
U.S. energy firms this week added oil and natural gas rigs for a third week in a row, as a recovery in oil prices prompted some drillers to return to the wellpad over the past year.
U.S. oil rigs rose eight to 405 this week, their highest since April 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday.
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This article was originally posted on FX Empire