Oil slumps over 3%, hits May lows as losses extend to a sixth day

Oil prices skidded on Thursday for a sixth session, hitting lows not seen since May, pressured by a stronger U.S. dollar and concerns about weaker demand as COVID-19 cases rise. The oil market rallied throughout the first half of 2021, but the newest wave of coronavirus infections throughout the world has sapped global travel and threatens economic activity. That comes just as major oil producers are readying supply increases and as U.S. drilling activity edges up. “There seems to be a lot of people getting squeezed out of long positions,” said Phil Flynn, analyst at Price Futures Group.

Brent crude was down $2.42, or 3.6%, to $65.82 a barrel after touching $65.57, lowest since May 21. The most-active contract for U.S. West Intermediate fell $2.54, or 3.9%, to $62.67 a barrel. It fell earlier to $62.41 a barrel, lowest since May 21. Both benchmarks have declined for six days in a row, the longest losing streak since February 2020. Volumes on Thursday were relatively light, considering the magnitude of the sell-off, said Flynn. Brent volumes were just under 250,000 contracts, while volumes for the most-active WTI contract were around 310,000. The Delta variant in areas of low vaccination is driving transmission of COVID-19, the World Health Organisation said. Coronavirus-related deaths have spiked in the United States over the past month.

The U.S. dollar hit a nine-month high on Thursday after Federal Reserve meeting minutes showed policymakers are considering reducing pandemic-era stimulus this year. A rising U.S. dollar makes greenback-denominated oil more expensive for holders of other currencies. “There’s concern that the Fed will begin tapering, resulting in a stronger dollar and weaker crude prices,” said Andrew Lipow, president of Lipow Oil Associates in Houston. U.S. gasoline inventories rose unexpected last week, according to federal data, adding to concern about demand. U.S. gasoline consumption tends to peak in the summer months, and should ebb headed into the latter months of 2021. The International Energy Agency last week trimmed its oil demand outlook due to the spread of the Delta variant. OPEC, however, left its demand forecasts unchanged.

Reuters