Oil Drops With Stronger Dollar and OPEC-Fueled Uncertainty
(Bloomberg) -- Oil fell for a third straight session as the dollar rose and investors awaited further signals from the OPEC+ alliance on its production policy after a dispute upended talks.
Futures slipped 1.6% in New York on Wednesday. The U.S. dollar advanced to a three-month high before paring gains. A stronger dollar tends to reduce the appeal of commodities priced in the currency. Investors are assessing an ongoing crisis within the producer alliance that’s threatening a global supply deficit.
“The jury is still out about what the disarray within OPEC+ will amount to,” said John Kilduff, a partner at Again Capital LLC.
Futures clung to losses in after-market trading after the industry-funded American Petroleum Institute was said to report U.S. crude supplies fell 7.98 million barrels last week, while inventories at the nation’s biggest storage hub at Cushing, Oklahoma, rose.
Oil prices have soared nearly 50% so far this year with consumption returning and the previous OPEC+ production deal keeping a lid on output. But investors remain uncertain about both the future of the alliance’s supply agreement as well as the demand recovery with the delta variant continuing to plague nations.
JPMorgan Chase & Co. is among banks that anticipate a deal will be found. OPEC+ is expected to eventually agree in the coming weeks to increase production by 400,000 barrels a day each month for the rest of 2021, it said in a note.
“People are just wildly uncertain” what the OPEC+ stalemate means for the future of output, said Edward Moya, senior market analyst at Oanda Corp. “August is in question and the demand warrants more production.”
Meanwhile, U.S. shale executives are locking in prices for the oil they plan to produce next year and protecting themselves against a potential market slump, people familiar with the trades said.
The API also reported gasoline supplies fell 2.74 million barrels last week and distillate inventories rose 1.09 million barrels.
U.S. crude production next year is forecast at 11.85 million barrels a day, the Energy Information Administration said in its monthly Short-Term Energy Outlook on Wednesday. That’s up from a previous forecast of 11.79 million barrels a day.
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