Oil dips, but posts gains for the week and month
Oil prices fell on Friday as a collapse in bond prices led to gains in the U.S. dollar and expectations grew that with oil prices back above pre-pandemic levels, more supply is likely to come back to the market.
U.S. West Texas Intermediate (WTI) crude futures dipped 3.2% to settle at $61.50 per barrel.
For the week the contract gained 3.81%. For February WTI advanced 17.82%.
Brent crude futures for April delivery slid 1.12% to $66.13 per barrel.
“Bonds are selling off reasonably aggressively and the U.S. dollar has firmed this morning. That’s providing a bit of a headwind for crude oil this morning,” said Lachlan Shaw, National Australia Bank’s head of commodity research.
A stronger greenback makes U.S.-dollar priced oil more expensive for those buying crude in other currencies.
Despite the drop in prices on Friday, both Brent and WTI are on track for gains of about 20% this month, as markets have grappled with supply disruptions in the United States, while optimism has built for demand to improve with vaccine rollouts.
Investors are betting that next week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, will result in more supply coming back to the market, given the recent jump in prices and expectations that demand will improve as pandemic lockdowns ease heading into the northern hemisphere summer.
U.S. crude prices also face headwinds from the loss of refinery demand after several Gulf Coast facilities were shuttered during the winter storm last week.
There is about 4 million barrels per day of capacity still shut and it may take until March 5 for all of the shut capacity to resume though there is risk of delays, analysts at J.P. Morgan said in a note this week.
Reference: CNBC
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