Oil Pares Drop With Dollar Fall Easing Virus Weakness

Jul 8, 2021

(Bloomberg) Oil pared declines as the dollar dropped while concerns over a surge of the delta coronavirus variant and a dispute at the heart of OPEC kept traders worried about the market.West Texas Intermediate futures lost 0.2%. The renewed spread of the virus is bringing on anxiety about global growth, driving equities lower and reversing bets on reflation. The dollar fell, making commodities priced in the currency more attractive.

The World Health Organization urged caution on the pace of reopenings worldwide, with many regions seeing infections spreading. Indonesia is in the throes of a major outbreak, Thailand is set to consider a partial lockdown, and Japan is planning to declare a state of emergency over the Tokyo Olympics.

WTI falling toward 50-day average on OPEC+ disunity

A spat between Saudi Arabia and the United Arab Emirates derailed plans by OPEC+ nations to boost output in August and beyond to meet rising demand. While the impasse may tighten the market in the short term, it also creates division in the group and raises the specter of a price war should producers opt to boost output unilaterally.

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The row has even spurred speculation the UAE may go as far as to quit the Organization of Petroleum Exporting Countries altogether, threatening the unity and control the group and its allies have fought hard for since the pandemic upended the oil market early last year.

“With the non-agreement, the supply side of the oil equation has been thrown into chaos,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “Discord, let alone an output war, within OPEC+ will not be well received by the market.”

Prices:
WTI for August delivery fell 16 cents to $72.04 a barrel as of 9:06 a.m. in New York Brent for September settlement lost 13 cents to $73.30 a barrel

Crude’s decline this week comes despite signs of another draw in U.S. stockpiles. The American Petroleum Institute said crude holdings fell almost 8 million barrels last week, while inventories of gasoline also dropped, according to people familiar with the data. Official figures are due later Thursday.

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