Oil futures finished lower for a seventh straight day on Friday, with U.S. benchmark prices losing almost 9% for the week, as worry about the impact on energy demand from the spread of the coronavirus delta variant took a toll.
“Concerns about the delta variant loom large on the near term demand outlook for all commodities, including oil,” said Peter McNally, global sector lead for industrials, materials and energy at Third Bridge in New York.
“The rising U.S. dollar is another factor at play in the drop in commodity prices,” he told MarketWatch. Strength in the dollar can pressure prices for dollar-denominated commodities. The ICE U.S. Dollar Index
traded around a nine-month high on Friday.
The oil market has also had to “contend with additional supplies at a time when questions about the pace of demand growth are increasing,” said McNally. The OPEC+ — the Organization of the Petroleum Exporting Countries and their allies — agreed in July to gradually increase production on a monthly basis starting in August.
This year has been a “cooler year for Chinese oil imports,” recent additional COVID restrictions raised more questions about the pace of demand growth for the rest of the year, and the “seasonal slowdown after the summer travel season in the developed world is just ahead,” McNally said.
West Texas Intermediate crude for September delivery
fell $1.37, or nearly 2.2%, to settle at $62.32 a barrel on the New York Mercantile Exchange, the lowest finish since May. The front-month contract marked a weekly fall of 8.9%, according to Dow Jones Market Data. That was the biggest such loss since more than 10% drop reported for the week ended Oct. 30.
The most active, and new front month October WTI
dropped $1.36, or 2.1%, to settle at $62.14 a barrel.
October Brent crude
the global benchmark, lost $1.27, or 1.9%, at $65.18 a barrel on ICE Futures Europe, for a 7.7% weekly fall and the lowest settlement since May.
Crude fell sharply on Thursday, getting caught up in a broad market selloff that saw metals and other commodities tumble along with global equities. U.S. stocks posted a mixed finish, but saw economically sensitive sectors left behind.
Oil futures weren’t helped earlier this week by data showing a drop in U.S. crude inventories, with investors instead focused on the global demand outlook, and a drop in U.S. gasoline demand just weeks ahead of the end of summer driving season, which ends on Labor Day weekend in early September.
The U.S. benchmark is now testing chart support at $63 a barrel, with bears targeting the 200-day moving average near $60 a barrel, said Ipek Ozkardeskaya, senior analyst at Swissquote, in a note.
“The actual mood points at deeper pullback in oil prices, and price recoveries could be interesting top-selling opportunities for those targeting a return to the $60 [a barrel] mark,” the analyst wrote.
Meanwhile, U.S. shale oil production has been “creeping higher,” said Third Bridge’s McNally, adding that the U.S. drilling rig count is on the rise.
on Friday reported a third straight weekly increase in the number of active oil-drilling rigs, up by eight to 405 this week.
Back on Nymex, September gasoline
fell 2.8% to settle at $2.02 a gallon, the lowest since April, for a weekly decline of more than 10%. September heating oil
shed 3.1% to $1.91 a gallon, ending the week over 8% lower.
September natural gas
ended at $3.85 per million British thermal units, up nearly 0.6% for the session and losing 0.3% from the week-ago finish.