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Oil Battered in Ugly Week as Dollar, Demand Concerns Spur Slump

CommoditiesMar 19, 2021 00:45
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2/2 © Bloomberg. The sun sets beyond crude oil storage tanks at Saudi Aramco's Ras Tanura oil refinery. Photographer: Simon Dawson/Bloomberg 2/2

(Bloomberg) -- Oil extended a dramatic rout, declining for a sixth day to trade below $60 a barrel on concern about near-term demand and a rising dollar.

West Texas Intermediate in New York is on course for the biggest weekly loss since October as a slew of negative factors combined to drive a sudden selloff. Inflation concerns that lifted Treasury yields pushed the U.S. currency higher, just as signs emerged of softer demand in Asia. In addition, crude’s plunge may be linked to some unwinding of long positions by commodity trading advisors as daily moves of more than 3% can trigger funds to quickly unload.

Oil’s run of losses means that the world’s most important commodity has suffered from an abrupt reversal of fortunes, although prices remain more than 20% higher this year amid optimism about a recovery from the pandemic. A surprise decision by the Organization of Petroleum Exporting Countries and its allies to extend supply curbs in the first week of March spurred talk of a tightening global market and a raft of price forecast upgrades from top banks. That has swiftly unraveled, although positive signs remain.

Data from the U.S. suggest that the latest bout of massive fiscal stimulus may help to spur increased travel with the economy gradually opening, potentially reinforcing energy demand. And in Europe, the European Union’s drugs regulator endorsed AstraZeneca (NASDAQ:AZN) Plc’s Covid-19 vaccine after concerns about its safety, boosting the bloc’s vaccination efforts.

A rising dollar makes raw materials priced in the greenback more expensive for holders of other currencies. Oil’s swoon on Thursday, when a gauge of the dollar rose 0.5%, was accompanied by retreats in other key commodities including gold.

©2021 Bloomberg L.P.

Oil Battered in Ugly Week as Dollar, Demand Concerns Spur Slump
 

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