Oil continues to fall as the Fed considers tapering, OPEC+ turns to the taps | Corona virus pandemic news
Oil’s rally in the first half of the year has lost its momentum since July amid the threat to demand from the spread of the highly contagious delta type of coronavirus.
Oil fell for the sixth day in a row to its lowest level since May after the Federal Reserve indicated on Wednesday that it is set to begin reducing asset purchases within months.
West Texas Intermediate crude futures ended the session 2.7% lower, falling below $64 a barrel amid a broader sell-off in commodities, as the prospect of a stimulus cut rattled markets.
The Delta virus variant of air travel is dampening demand, with enthusiasm for air travel waning in both the US and Japan.
Asia’s physical market is in decline with silent purchases from China and India’s move to sell oil from its strategic reserves.
“The dollar is seeing significant strength as the Fed moves to calm the economy,” said John Kilduff, partner at Again Capital LLC. “Oil was already under downward pressure as the market faltered from sluggish demand from China, and the decline in commodity attractiveness encouraged further declines.”
The rise in oil prices in the first half of the year has lost its momentum since July amid the demand threat posed by the spread of the variable delta.
At the same time, OPEC+ moved forward with the gradual restoration of supplies. The combination of factors led major analysts to cut price expectations for the latter half of the year.
To protect the US economy from the blow of the pandemic, the Federal Reserve has been buying $120 billion in assets every month, boosting commodities.
The minutes of the bank’s July meeting showed a potential dip in its monthly bond purchases, with most participants now arguing that it might be appropriate to start reducing the pace of stimulus.
“Economic growth concerns, a stronger dollar and a risk-averse environment are not helping oil,” said Giovanni Stonovo, analyst at UBS Group AG. Demand will continue to recover unevenly over the coming weeks and the oil market will continue to be undersupplied. So this should continue to support prices going forward.”
- West Texas Intermediate crude for September delivery fell $1.77 to settle at $63.69 a barrel in New York. It fell 4.3% earlier.
- Brent for October fell $1.78 to end the session at $66.45 a barrel.
- Road traffic remains low in many Southeast Asian countries with various levels of lockdowns still in place.
“Consumption indicators out of the region have a global impact,” said Stuart Glickman, energy equity analyst at CFRA Research. “Where China is going, investors are following suit.”
- The Asian crude oil market fell this week as subdued buying from China coincided with a sudden move by India to sell oil from its strategic reserves to state-run refineries.
- Barely a week after the White House called on OPEC+ to raise oil production faster, the group could think of a completely different path.
- Saudi Arabia is likely to consider a pause in the upcoming OPEC+ oversupply, according to Energy Aspects.