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Oil futures fell Monday, pressured as Beijing moved to contain a renewed rise in COVID-19 cases and global equities tumbled as shock waves from last week’s hotter-than-expected U.S. consumer-price index reading continued to ripple through financial markets.
Price action
-
West Texas Intermediate crude for July delivery
CL.1,
-1.77% CLN22,
-1.77%
fell $1.89, or 1.6%, to $118.78 a barrel on the New York Mercantile Exchange. -
August Brent crude
BRN00,
-1.59% BRNQ22,
-1.59% ,
the global benchmark, declined $1.64, or 1.3%, to $120.33 a barrel on ICE Futures Europe. WTI and Brent hit three-month highs last week. -
Back on Nymex, July gasoline
RBN22,
-2.26%
dropped 2.2% to $4.0821 a gallon, continuing a pullback from all-time highs seen last week, while July heating oil
HON22,
-0.93%
was off 0.8% at $4.3297 a gallon. -
July natural-gas futures
NGN22,
-2.06%
shed 2.5% to $8.63 per million British thermal units.
Market drivers
Beijing moved to increase testing after a COVID-19 outbreak tied to a nightclub. The outbreak has infected at least 183 people in 15 districts, according to news reports.
“Hopes that oil demand would return quickly and completely to normal after previous lockdowns were lifted in China, the world’s second most important oil consumer, have thus proven premature,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
Meanwhile, U.S. stocks appeared on track for another session of heavy losses as a global equity selloff continued in the wake of a Friday consumer-price index reading that showed inflation running at a 40-year high of 8.6% year-over-year in May.
“If the Fed were to raise interest rates considerably more steeply in response and the U.S. economy were to slide into recession, this would also affect oil demand in the world’s largest oil consuming country,” Fritsch said, noting worries that plans outlined by the European Central Bank to begin lifting rates last week have stirred recession fears for the eurozone.
A renewed surge by the U.S. dollar on expectations for the U.S. Federal Reserve to ramp up its aggressive monetary tightening efforts was also a headwind for crude and other commodities priced in the unit. A stronger dollar makes them more expensive to users of other currencies.
The ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, was up 0.6%.
