Oil futures were on track to extend a losing streak to six sessions Thursday, falling as the spread of the delta variant of the coronavirus that causes COVID-19 underlined worries about the demand outlook, and as the U.S. dollar rallied.
West Texas Intermediate crude for September delivery
the global benchmark, was down $2.07, or 3%, at $66.16 a barrel on ICE Futures Europe. Both grades were trading at the lowest for most actively traded contracts since May.
“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 0.2% at 93.33 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 assets perceived as risky, including stocks and commodities, after the minutes of the Federal Reserve’s July policy meeting, released Wednesday, showed “most” policy makers favored scaling back asset 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.