Friday, January 21

Oil heads for worst streak since March as Biden could step in

Oil headed for its longest streak of weekly losses since March as President Joe Biden kept investors guessing if he will act to control prices that have helped fuel a surge in US inflation, hurting consumers.

West Texas Intermediate fell 0.7%, putting crude on course for a third weekly decline, with headwinds added by a stronger dollar. Biden is weighing measures including a release of oil from the Strategic Petroleum Reserve to try to lower the cost of gasoline at the pump, which has reached a seven-year high.

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For several weeks, a small group of senior advisers have discussed possible moves, according to people familiar with the matter. Consensus has been elusive, with some Energy Department officials opposed to turning to the SPR as White House advisers push for a release, or even halt, US crude exports.

Oil has advanced further this year as consumption rebounded from the impact of the pandemic, contributing to the fastest consumer price inflation in the United States in decades. Faced with mounting political pressure to act, Biden is weighing his options for intervention after the Organization of the Petroleum Exporting Countries and its allies rejected his call to boost production at a faster pace.

The challenge facing Biden over gas costs is particularly evident in California, the state where drivers generally pay more for fuel than anywhere else in the US Retail prices now average $ 4.65 per gallon, just 2 cents below the record set in 2012. according to AAA data.

Still, beyond the US, there are some areas of weakness with a resurgence of Covid-19 cases in Eastern Europe. In Asia, Beijing officials are calling for events to be moved online as the group grows. Furthermore, the Chinese economy probably weakened last month, with little sign that it is bottoming out.

“The focus will return to demand,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group. “Some headwinds are on the horizon, including increased restrictions in key markets in Eastern Europe and China amid rising coronavirus cases, keeping prices volatile.”

  • WTI for December delivery fell 0.7% to $ 81.03 a barrel on the New York Mercantile Exchange at 7:22 am in London.
  • Brent for the January settlement fell 0.7% to $ 82.32 a barrel on the ICE Futures Europe exchange.

The drop in oil has come as an indicator that the dollar is pointing to a weekly gain of 1%, the highest since August, amid concerns that rising inflation in the US justifies interest rate hikes. by the Federal Reserve. A stronger dollar makes commodities priced in the currency less attractive to foreign buyers.

While advocating a cautious approach to restoring supply, OPEC has struggled to meet its modest production growth targets. Its production expanded by 217,000 barrels a day in October, according to a monthly report. That’s less than its share of the 400,000 barrel-a-day monthly increase agreed upon by OPEC +.

The market remains behind, a bullish price pattern marked by short-term prices that trade at a premium compared to those of a longer date. Brent’s immediate margin was $ 1.05 a barrel in backwardation, compared with $ 1.08 on Monday.

© 2021 Bloomberg

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