Brent crude settles below $100/bbl on higher dollar, weak demand outlook

Pump jacks function at sundown in an oil subject in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford

HOUSTON, July 12 (Reuters) – World benchmark Brent crude tumbled $7 on Tuesday to settle under $100 a barrel for the primary time in three months on a strengthening greenback, COVID-19 curbs in prime crude importer China, and rising fears of a worldwide financial slowdown.

The sharp drop adopted a month of risky buying and selling through which traders have offered oil positions on worries that aggressive rate of interest hikes to stem inflation will spur an financial downturn that may hit oil demand.

Brent crude futures settled $7.61, or 7.1% decrease, at $99.49 a barrel, its lowest since April 11. U.S. West Texas Intermediate crude was down $8.25, or 7.9%, at $95.84, additionally the bottom in three month.

Since their peak this 12 months in March, Brent has declined 29%, whereas WTI has fallen 27%.

Oil costs are going through excessive strain “as a defensive posture continues with client sentiment nonetheless in a depressed mode together with a COVID re-surface in China,” mentioned Dennis Kissler, senior vice chairman for buying and selling at BOK Monetary.

The greenback index , which tracks the foreign money in opposition to a basket of six counterparts, additionally climbed earlier within the day to 108.56, its highest stage since October 2002.

Oil is mostly priced in U.S. {dollars}, so a stronger dollar makes the commodity costlier to holders of different currencies. Traders additionally are likely to view the greenback as a secure haven throughout market volatility.

Recession fears have additionally compelled traders to dump petroleum-related derivatives at one of many quickest charges of the pandemic period. Hedge funds and different cash managers offered the equal of 110 million barrels within the six most necessary petroleum-related futures and choices contracts within the week to July 5. learn extra

Open curiosity in New York Mercantile Alternate (NYMEX) futures fell on July 7 to its lowest since October 2015.

Shut-to-close volatility on Brent and WTI is at its highest stage since early April. Decrease liquidity usually ends in a extra risky market.

Renewed COVID-19 journey curbs in China weighed on oil costs too, with a number of Chinese language cities adopting recent restrictions, from enterprise shutdowns to broader lockdowns, in an effort to rein in new infections from a extremely infectious subvariant of the virus. learn extra

U.S. President Joe Biden will make the case for greater oil manufacturing from OPEC when he meets Gulf leaders in Saudi Arabia this week, White Home nationwide safety adviser Jake Sullivan mentioned on Monday. learn extra

Nonetheless, business insiders, sources and specialists have questioned whether or not, with present output of a minimum of 10.5 million barrels per day, Saudi Arabia actually has one other 1.5 million bpd up its sleeve that may be introduced on-line rapidly and sustained. learn extra

Spare capability inside Group of the Petroleum Exporting International locations (OPEC) has been working low, with most producers pumping at most capability. OPEC on Tuesday additionally forecast that world oil demand will rise by 2.7 million bpd in 2023, barely slower than in 2022. learn extra

The U.S. Vitality Data Administration (EIA) forecast an increase in U.S. crude manufacturing and petroleum demand in 2022 because the economic system grows. learn extra

Crude shares rose by about 4.8 million barrels for the week ended July 8, market sources citing American Petroleum Institute figures mentioned. Gasoline inventories additionally rose by 3 million barrels, in keeping with the sources. Stock information from the EIA is anticipated on Wednesday.

U.S. Treasury Secretary Janet Yellen is in Asia to debate methods to strengthen sanctions in opposition to Russia, together with a value cap on Russian oil to restrict the nation’s earnings and assist decrease power costs. learn extra

Worldwide Vitality Company (IEA) Govt Director Fatih Birol mentioned that any value caps on Russian oil ought to embody refined merchandise. learn extra

Reporting by Arathy Somasekhar; further reporting by Ahmad Ghaddar in London, Florence Tan in Singapore and Emily Chow in Kuala Lumpur;Modifying by Marguerita Choy, David Goodman, Paul Simao and Jonathan Oatis

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