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Oil futures lost ground Monday, as worries over the potential collapse of China property giant Evergrande sent ripples through global financial markets, lifting the U.S. dollar.
West Texas Intermediate crude for October delivery
CLV21,
fell 81 cents, or 1.1%, to $71.16 a barrel on the New York Mercantile Exchange. November WTI
CL00,
CLX21,
the move active contract, was down 80 cents, or 1.1%, at $71.02 a barrel.
November Brent crude
BRN00,
BRNX21,
the global benchmark, was off 60 cents, or 0.8%, at $74.74 a barrel on ICE Futures Europe. Both WTI and Brent jumped more than 3% last week to trade at seven-week highs.
“WTI is down during early Monday trading with the price of the barrel negatively impacted by the strength of the dollar,” said Ricardo Evangelista, senior analyst at ActivTrades, in a note.
“The greenback started the week on the front foot, trading at its highest for three weeks, as investors fear the fallout from the developing situation in China, where Evergrande, one of the country’s largest construction firms, is at risk of defaulting on debt repayments, triggering a bout of risk aversion in the financial markets and driving demand for the safe haven dollar,” he wrote.
Safe-haven assets, including the U.S. dollar, got a lift, with the ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, up 0.2%. A stronger dollar can be a headwind for commodities priced in the unit, making them more expensive to users of other currencies.
Traders will also be on alert for clues to the timing of the Federal Reserve’s plan to eventually begin tapering its monthly bond purchases. Fed policy makers begin a two-day policy meeting on Tuesday.
Meanwhile, crude production in the Gulf of Mexico continues to slowly recover from Hurricane Ida, which made landfall on the Louisiana coast on Aug. 29. The Bureau of Safety and Environmental Enforcement on Friday estimated 23.2% of Gulf crude production, equal to around 422,000 barrels a day, remained shut in, along with around 34% of natural-gas output. Updated figures are expected later Monday.
The slow return of crude output was seen helping lift prices in recent weeks, though the pace of the recovery picked up last week, noted Carsten Fritsch, analyst at Commerzbank, in a Monday note.
“If production continues to normalize at the pace it did last week — the outage a week ago was still 1.2 million barrels per day, i.e. two thirds of production — we will probably not quite see the outage of up to 30 million barrels that was forecast,” he said.
Also on Nymex Monday, October gasoline
RBV21,
lost 1.2% to $2.14 a gallon and October heating oil
HOV21,
shed 1.3% to 2.18 a gallon.
October natural gas
NGV21,
traded at $5.098 per million British thermal units, down 0.1%.
