Oil futures fell Monday, eyeing a their third session loss in a row, as Beijing moved to contain a renewed rise in COVID-19 cases and global equities tumbled as shockwaves from last week’s hotter-than-expected U.S. consumer-price index reading continued to ripple through financial markets.
West Texas Intermediate crude for July delivery
fell $2.80, or 2.3%, to $117.87 a barrel on the New York Mercantile Exchange after ending lower on Thursday and Friday.
Back on Nymex, July gasoline
dropped 4.4% to $3.9877 a gallon, continuing a pullback from all-time highs seen last week, while July heating oil
was off 3.4% at $4.2204 a gallon.
July natural-gas futures
shed 3.4% to $8.551 per million British thermal units.
Beijing moved to increase testing after a COVID-19 outbreak tied to a nightclub. The outbreak has infected at least 183 people in 15 districts, according to news reports.
Concerns that China will lock down more cities because of an uptick in COVID have hurt expectations for energy demand and “we’re seeing the stock market get obliterated on rising interest-rate concerns,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
U.S. stocks saw another session of heavy losses as a global equity selloff continued in the wake of a Friday consumer-price index reading that showed inflation running at a 40-year high of 8.6% year-over-year in May.
“If the Fed were to raise interest rates considerably more steeply in response and the U.S. economy were to slide into recession, this would also affect oil demand in the world’s largest oil consuming country,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note. He also said worries that plans outlined by the European Central Bank to begin lifting rates last week have stirred recession fears for the eurozone.
Meanwhile, U.S. President Joe Biden is expected to announced a trip next month to Saudi Arabia, The Wall Street Journal reported late Sunday. That’s “leading to speculation that maybe the Saudis could add more barrels,” said Flynn, adding that he’s “still very skeptical that they’re going to be that accommodative” toward any U.S. calls for more oil.
A renewed surge by the U.S. dollar on expectations for the U.S. Federal Reserve to ramp up its aggressive monetary tightening efforts was also a headwind for crude and other commodities priced in the unit. A stronger dollar makes them more expensive to users of other currencies.
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was up 0.8%.