Oil extended losses as worries about demand growth and a surging dollar erased earlier gains.
(Bloomberg) — Oil extended losses as worries about demand growth and a surging dollar erased earlier gains.
West Texas Intermediate eased to trade near $70 a barrel after three straight weeks of losses. Earlier in the session, prices were supported by signs that Iraqi oil exports likely won’t resume on Saturday and after the US government signaled it could purchase crude to refill the strategic reserve after next month. But a strong dollar, which makes oil more expensive for holders of other currencies, wiped out those gains.
Over the week, oil has been weighed by the physical market showing signs of weakness amid poor refining margins and lackluster buying in some areas. The world’s two biggest economies also showed further evidence of cooling, with US jobless claims rising and China’s recovery waning.
“Dollar strength seems to be running the show today,” said Emily Ashford, an energy analyst at Standard Chartered Bank. Trading was thin with the market still wary of the macro picture, she added.
Crude has retreated by about 15% over the past month as bearish sentiment has gripped the market. Traders expect the US economy to inch closer to recession and China’s rebound has disappointed some market watchers, putting a question mark over energy demand. On Friday, Citigroup cut its forecast for Brent crude from $84 a barrel to average around $82 a barrel this year with demand continuing to underperform expectations.
So far, that’s outweighed the lift from supply cuts announced by the Organization of Petroleum Exporting Countries and its allies. However, further cuts may not be on the table for now, Reuters reported, citing an interview with Hayyan Abdul Ghani, Iraq’s oil minister.
Prices have found technical support near $70 and $75 a barrel so far but a decline below those levels could send oil tumbling quickly toward the mid-60s, market participants said.
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–With assistance from Natalia Kniazhevich and Sri Taylor.
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