Abstract:Oil headed for a substantial weekly loss, hurt by the Federal Reserve’s move toward tapering asset purchases, a rally in the U.S. dollar and concerns about global energy demand.
Oil headed for a substantial weekly loss, hurt by the Federal Reserves move toward tapering asset purchases, a rally in the U.S. dollar and concerns about global energy demand.
West Texas Intermediate has shed more than 6% this week, and closed at the lowest since May on Thursday amid a broad retreat across commodities. Most-active prices for the U.S. benchmark climbed 0.5% to around $64 a barrel in early trading on Friday.
Oil has been buffeted this month by the prospect of the Fed cutting back on its extraordinary monetary stimulus despite the spread of the delta coronavirus variant. The pandemic remains a threat to energy demand, especially across Asia, with key importer China restricting mobility to combat an outbreak.
Crudes sudden 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.
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 was matched by retreats in copper and other raw materials.
Oil prices drifted lower on Friday, wiping out gains from the previous session, as the dollar continued to rise on bets the U.S. central bank will bring forward plans to raise rates to tame inflation.
Oil gained at the start of the week’s trading on signs that the crude market is tightening because of the global energy crunch.
Oil steadied as September opened, with traders counting down the hours until an OPEC+ meeting that should result in a further rise in output.
Oil has had a volatile August with the fast-spreading delta variant of the virus leading to renewed restrictions on mobility and clouding the outlook for fuel demand.