Oil Market Dips on Stronger US Dollar, Demand Concerns

By Adedapo Adesanya

The oil market slipped yet again on Tuesday over a strong US dollar and concerns about weak demand in the United States and Asia.

Industry analysts said a strengthening US dollar weighed on crude prices, making oil more expensive for holders of other currencies.

This coincides with the world’s largest economy creating the fewest jobs in seven months in August as hiring in the leisure and hospitality sector stalled amid a resurgence in COVID-19 infections.

At the market yesterday, the price of the Brent crude fell by 53 cents or 0.7 per cent to $71.69 per barrel, while the West Texas Intermediate (WTI) crude slid 94 cents or 1.4 per cent to settle at $68.35 a barrel.

The oil market continues to face demand pressure as Saudi Arabia cut the price for all crude grades sold to Asia by at least $1 a barrel.

The move, a sign that consumption in the world’s top-importing region remains tepid, comes as lockdowns across Asia to combat the Delta variant of the coronavirus have clouded the economic outlook.

The fast-spreading variant has raised demand concerns in recent weeks, though China was able to swiftly contain its latest outbreak.

The Asian country’s overall imports also rose, with crude purchases climbing to a five-month high, pointing to a revival in the region’s biggest economy following a recent wave of COVID-19 infections.

The world’s largest crude oil importer saw its imports in August rose by 8 per cent month over month. Chinese refiners imported an estimated 10.49 million barrels per day of crude in August, up from 9.71 million barrels per day in July.

There are expectations that the global oil market will tighten over the rest of 2021, with the Organization of Petroleum Exporting Countries and its allies, OPEC+ deciding last week to keep boosting supply on a bet that the recovery will accelerate.

Post-Ida recovery efforts are still continuing with the storm’s initial impact on oil greater than any other storm in history with more than 80 per cent of oil production in the Gulf of Mexico still shut.