Oil futures stretched their losses into a sixth straight session on Thursday, with prices settling at their lowest since May as the spread of the coronavirus delta variant underlines worries about the demand outlook, and as the U.S. dollar rallies.
Crude’s six-day losing streak “seems a bit overdone but for it to stop, it might need a sign” from OPEC+ — the Organization of the Petroleum Exporting Countries and their allies — that it might hold off on plans to ramp up output, said Edward Moya, senior market analyst at Oanda, in a market update.
“The oil market is still in deficit and a breach below the $60 level [for WTI] will likely attract many long-term bullish bets,” he said. “The bottom could be nearing here for crude, but energy traders will need to see some positive headlines regarding global economic growth. “
West Texas Intermediate crude for September delivery
fell $1.77, or 2.7%, to settle at $63.69 a barrel on the New York Mercantile Exchange ahead of its expiration at Friday’s settlement. The most actively traded October contract
the global benchmark, lost $1.78, or 2.6%, at $66.45 a barrel on ICE Futures Europe.
Both WTI and Brent crude marked the lowest front-month contract settlements since May, according to Dow Jones Market Data. Prices for the benchmarks also fell for a sixth straight session, the longest losing streak since the six-session decline ended Feb. 28, 2020.
“Besides the concerns about demand, which have already been discussed at length, the pronounced slide in base metals and the strong U.S. dollar are now weighing on prices,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was up 0.5% at 93.56 after taking out its March high to trade at its loftiest level since November. A stronger dollar can be a negative for commodities priced in the currency, making them more expensive to users of other currencies.
The dollar’s rise, however, also appeared to be part of a flight-to-safety prompted by the selloff in stocks and other commodities, after the minutes of the Federal Reserve’s July policy meeting, released Wednesday, showed “most” policy makers favored scaling back bond purchases this year.
In particular, some analysts have argued that the move toward tapering bond purchases comes as worries mount over the potential hit to economic growth from the spread of the delta variant.
Data from the U.S. Energy Information Administration on Wednesday showing a fall in gasoline demand may also be hanging over the market. “Though the summer driving season still has three weeks to go, it is already clear that it will not meet the high expectations,” Fritsch said.
The steep rise in new coronavirus cases in the U.S. also makes any positive surprise unlikely in the next few weeks, “because many people will probably opt not to travel for fear of catching the virus,” he said.
The number of U.S. cases of COVID-19 reported Wednesday rose to 140,893, up 47% from two weeks ago, while the daily average for deaths rose to 809, up 97% from two weeks ago and the highest seen since early April, according to a New York Times tracker.
September natural gas
settled at $3.83 per million British thermal units, down 0.6%.
The EIA said Thursday that domestic supplies of natural gas rose by 46 billion cubic feet for the week ended Aug. 13. On average, analysts forecast an increase of 35 billion cubic feet, according to a poll conducted by S&P Global Platts.
The EIA said the data, however, included an adjustment to the week’s total to account for a reclassification of some gas stocks from base gas to working gas. Working gas is the volume of gas available in the market. The implied flow for the week is an increase of 42 bcf to working gas stocks, the EIA said.