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Oil falls 2% on risk aversion, dollar strength

Oil prices fell 2% on Monday as investors grew more risk averse, which hurt stock markets and boosted the U.S. dollar, making oil more expensive for holders of other currencies.

Brent crude fell $1.42, or 1.9%, to settle at $73.92 a barrel after sinking to a session low of $73.52.

U.S. West Texas Intermediate (WTI) declined $1.68, or 2.3%, to end at $70.29 after falling to as low as $69.86.

The dollar, seen as a safe haven, rose as worries about Chinese property developer Evergrande’s solvency spooked equity markets and investors braced for the Federal Reserve to take another step toward tapering this week.

Still, oil drew some support from signs that some U.S. Gulf output will stay offline for months due to storm damage.

Brent has gained 43% this year, supported by supply cuts by the Organization of the Petroleum Exporting Countries and allies, and some recovery in demand after last year’s pandemic-induced collapse.

Losses on Monday were limited due to supply shutdowns in the U.S. Gulf of Mexico due to two recent hurricanes. As of Friday producing companies had just 23% of crude production offline, or 422,078 barrels per day.

Reference: CNBC