Oil prices fall 1% as supply strains storage
Oil prices fall on Friday, ending a two-day rally, as a glut of crude and refined products weighed on markets and investors eyed a possible stutter in China’s imports.
Futures held their losses after the dollar index spiked following abetter-than-expected U.S. jobs report that showed the country added 255,000 positions in July. A stronger greenback makes dollar-denominated crude more expensive to holders of other currencies.
U.S. West Texas Intermediate (WTI) crude crude futures fell 67 cents, or 1.6 percent, to $41.26 per barrel at 9:46 a.m. ET (1346 GMT).
“Signs of fatigue are already apparent and include a notable dip in Chinese crude oil imports,” PVM’s Stephen Brennock wrote, adding that spare capacity in the country’s strategic storage space is less than 100 million barrels.
“A major pillar of oil demand is therefore on course to ease considerably over the coming months,” Brennock said.
Still, China surpassed South Korea as the top Asian buyer of North Sea Forties crude this year, while trading house Trafigura was aggressively targeting China’s newest buyers by extending credit to two of the country’s independent refiners.
Investors added the equivalent of 56 million barrels of short positions in the three main Brent and WTI futures and options contracts in the week to July 26.
“Since there was no news yesterday that might have triggered the price rise, this points to short-covering,” Commerzbank analyst Carsten Fritsch said.
“Clearly many market participants were caught on the hop by the increase in prices following the publication of U.S. inventory data on Wednesday,” he said.Click here for reuse options!
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