By Barani Krishnan
Investing.com - It was great while it lasted, but the $40 support for U.S. crude may be something more elusive for the oil bull for now.
With the extended Labor Day holiday weekend symbolically bringing an end to the peak U.S. summer driving season, a familiar old theme seems to be making its rounds in the oil market: There may be more supply and less demand hereon.
And it’s all coming at the wrong time for crude bulls — just as global producer alliance OPEC decides to scale back on production cuts, the dollar turns mighty to weigh on commodity prices and stocks on Wall Street tumble in a broad aversion of risk.
While the U.S. August jobs report came within expectations, continued anxiety over the coronavirus and how quickly — or otherwise — a vaccine is delivered to the market was holding up confidence across markets, analysts said. Even gold, the traditional safe-haven, couldn’t muster a rally. Surging Treasury yields, meanwhile, didn’t help the dollar.
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled the day down $1.60 cents, or almost 4%, at $39.77 per barrel. For the week, WTI slumped 7.4%, its biggest weekly drop since June.
London-traded Brent, the bellwether for global crude prices, closed the New York session down $1.41, or 3.2%, at $42.66. For the week, Brent lost 5.3%. Like WTI, it was Brent’s biggest drop in a week since June.
“Crude prices can’t shake off the strong dollar,” Ed Moya, an analyst at New York’s OANDA, said, adding that oil could remain in the red if the global stocks rout continued.