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Oil Set for Weekly Loss as Emerging-Market Contagion Fears Grow


Sep 7, 2018, by Tsuyoshi Inajima and Alex Longley
(Bloomberg)

Oil is poised for the biggest weekly decline since mid-July as a rout in emerging markets raises contagion fears.

Futures in New York, little changed on Friday, are down 2.9 percent this week. Developing-nation equities slipped into a bear market, increasing concerns that the tumult could sap energy demand. Meanwhile, U.S. government data on Thursday showed crude inventories at Cushing in Oklahoma rose for a fourth week, with total stockpiles of gasoline and distillates also expanding.

The anxiety over emerging economies is the latest global event to damp market sentiment. The escalating trade tension between the U.S. and China has also led investors to shun risk, with crude prices slumping since July. Still, speculation that U.S. sanctions on Iran could tighten oil markets despite OPEC’s pledge to boost output has countered the bearish sentiments.

“The worries about demand and a possible spillover from emerging markets are weighing on prices,” said Hans van Cleef, senior energy economist at ABN Amro bank NV. “We have tested breaking higher, but that failed, so now we have a temporary setback. I still expect the market to turn higher at some point, probably driven by Iran.”

West Texas Intermediate for October delivery traded at $67.81 a barrel on the New York Mercantile Exchange, up 4 cents, at 11:04 a.m. in London. It’s set for the biggest weekly drop since July 13. Total volume traded was about 28 percent below the 100-day average.

Brent for November settlement lost 1 cent to $76.49 a barrel on the ICE Futures Europe exchange. It’s on course for a 1.2 percent slide this week. The global benchmark crude traded at a $8.91 premium to WTI for the same month.

Here are some key oil-market figures, news and events:

The MSCI Emerging Markets Index of equities extended losses from a January peak to just over 20 percent on Thursday, the threshold for a bear market. The index was up 0.4 percent on Friday. Currencies of developing nations have slumped, raising fears that energy demand could decline as those nations’ imports become more expensive. Some of America’s most prominent technology companies and retailers made a last-minute push to convince President Donald Trump to reverse course on tariffs on $200 billion of Chinese goods with the public-comment period on the administration’s plan concluding Thursday. Airlines are starting to hedge against the risk that fuel prices could be driven higher by rules targeting the shipping industry’s environmental performance, lifting the price of crude futures for 2020. Canadian crude prices are plunging once again as repairs were completed on Alberta’s second-biggest oil sands upgrader, and production surged from a new mine.



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