Oil prices fell on Friday morning for the seventh day in a row, which would be the longest run of daily declines since 2019, amid growing concerns about global oil demand and the signal from the Fed it would ease its stimulus program.
As of 8:25 a.m. EDT, WTI Crude was down 1.62% at $62.62 and Brent Crude had fallen by 1.58% at $65.36.
Both benchmarks were set on course for a 6% loss this week alone, as the market is increasingly worried about oil demand with surging Delta variant cases in major economies and as Fed’s signal that it would start tapering stimulus sparked a sell-off. The beginning of the end of the stimulus sent the U.S. dollar to a nine-month high on Thursday, which weighed on oil prices, as a stronger dollar makes oil buying more expensive for holders of other currencies.
The Fed signal coincided this week with growing concerns on the market about the pace of oil demand in the next few months in light of the new restrictions imposed in China, Japan, and Southeast Asia, where COVID-19 cases are surging. Australia and New Zealand also announced stricter measures.
The upcoming end of the U.S. driver season and the end of the holidays for many Europeans are also bearish factors for oil demand in the coming weeks.
The weekly EIA report on Wednesday was fairly constructive for oil, with only gasoline showing a small inventory build of 700,000 barrels.
“Given yesterday’s price action, the market is clearly more focused on the global demand outlook than EIA weekly numbers,” strategists Warren Patterson and Wenyu Yao said on Thursday.
Crude oil prices slumped to the lowest since May “in response to Covid-19 risks to demand in China and other major consumers, a stronger dollar and US shale production rising to a one-year high,” Saxo Bank said on Friday.
“Further weakness from here would once again turn the spotlight back on OPEC+ with verbal market intervention potentially being followed by talks of pausing agreed production increases until a clearer demand picture emerges,” the bank’s strategy team wrote.
By Tsvetana Paraskova for Oilprice.com