Oil Drops as Stronger Dollar Offsets Ongoing Crude Shut Ins

Oil held losses below $69 a barrel as investors assessed a demand outlook clouded by the Covid-19 resurgence in many regions.

Sheela Tobben

08 Sep 2021, 11:54 AM IST

Oil Drops as Stronger Dollar Offsets Ongoing Crude Shut Ins

Oil pumping jacks, also known as "nodding donkeys", operate in an oilfield near Almetyevsk, Russia. (Photographer: Andrey Rudakov/Bloomberg)

(Bloomberg) -- Oil closed lower for a second session as the dollar rose, offsetting bullish Chinese trade data and continued production outages in the U.S. Gulf of Mexico.

Futures in New York fell 1.4% with a stronger dollar making commodities priced in the currency less attractive. Meanwhile, the industry was still assessing the impact on oil assets from Hurricane Ida. Nearly 80% of crude oil production in the U.S. Gulf of Mexico remains offline.

“WTI is basically getting thumbed down by the rising U.S. dollar,” said Bart Melek, head of commodity strategy at TD Securities. Fears of slower-than-expected economic growth due to the delta-variant of the coronavirus and the impending Federal Reserve’s asset tapering later in 2021 may be prompting a pull back in risk appetite, he added.

The fast-spreading delta variant has raised demand concerns in recent weeks, though China was able to swiftly contain its latest outbreak. The Asian country’s overall imports also rose, with crude purchases climbing to a five-month high, pointing to a revival in the region’s biggest economy following a recent wave of Covid-19 infections.

There are expectations that the global oil market will tighten over the rest of 2021, with the Organization of Petroleum Exporting Countries and its allies deciding last week to keep boosting supply on a bet that the recovery will accelerate.

Prices
West Texas Intermediate for October delivery lost 94 cents from Friday’s close to settle at $68.35 a barrel in New York There was no settlement on Monday due to a U.S. holiday Brent for November settlement slipped 53 cents to end the session at $71.69 a barrel

Post-Ida recovery efforts are still continuing with the storm’s initial impact to oil greater than any other storm in history. Royal Dutch Shell Plc said it’s returning staff to its Auger and Enchilada/Salsa oil and natural gas platforms in the Gulf though those assets and others remain shut. Prices for regional sour crude benchmark Mars Blend surged to a seven-month high due to supply uncertainty.

Among Louisiana refiners, Exxon Mobil Corp. and Marathon Petroleum Corp. said parts of their respective crude processing plants were back in service.

Related Coverage
Enbridge Inc.,the Canadian pipeline giant, agreed to acquire a smaller U.S. rival to add export capacity on the Gulf Coast. Shell’s Norco refinery and chemical plant complex in south Louisiana is making repairs while remaining without power since Hurricane Ida came ashore Aug. 29, according to a spokesman. EPA issues waiver of ultra-low sulfur diesel requirements at Port Fourchon, Louisiana, to help improve the fuel supply circumstances caused by Hurricane Ida.

Related Coverage

Enbridge Inc.,the Canadian pipeline giant, agreed to acquire a smaller U.S. rival to add export capacity on the Gulf Coast.
Shell’s Norco refinery and chemical plant complex in south Louisiana is making repairs while remaining without power since Hurricane Ida came ashore Aug. 29, according to a spokesman.
EPA issues waiver of ultra-low sulfur diesel requirements at Port Fourchon, Louisiana, to help improve the fuel supply circumstances caused by Hurricane Ida.