Oil dips late, hit by China’s supply plan and US bond auction
In volatile trade, Brent futures fell $ 1.15, or 1.6%, to settle at $ 71.45 a barrel. U.S. West Texas Intermediate (WTI) crude fell $ 1.16, or 1.7%, to $ 68.14. This was the lowest settlement for the two since August 26.
“A huge auction of the 30-year bond with the lowest interest rate since January has scared the (oil) market into what looks like a flight to safety,” said John Kilduff, partner at Again Capital LLC in New York. .
After dropping to over $ 1 a barrel at the start of the session, both benchmarks turned positive following reports that a ship was stuck in the Suez Canal. The vessel was refloated and caused no delay.
Oil maintained these gains following a US report showing much higher than expected gasoline consumption and the slow and continued return of US production after Hurricane Ida.
But oil futures fell again to over $ 1 a barrel soon after strong afternoon demand for the US $ 24 billion 30-year bond auction hit. drives yields down to 1.91%. Investors sold riskier assets like oil and stocks.
Oil came under pressure when China’s state reserves administration announced it would release crude reserves in phases through public auctions to help domestic refiners control costs.
“China’s exploitation of its crude oil reserves is huge news and should bring great relief to refiners and chemical companies nationwide,” said Edward Moya, senior market analyst at OANDA.
U.S. crude inventories fell 1.5 million barrels in the week to September 3, according to government data, far below the 4.6 million barrels forecast by analysts. [API/S] [EIA/S]
The much larger-than-expected 7.2 million barrels drop in gasoline inventories supported oil prices. Analysts predicted gasoline inventories would decline by only 3.4 million barrels.
Royal Dutch Shell Plc has declared force majeure on certain oil deliveries due to damage caused by Ida.
Offshore Gulf wells represent around 17% of US production. Some 1.4 million barrels per day of crude production was still stranded.
As COVID-19 cases in the United States increase among the unvaccinated, President Joe Biden will introduce new approaches to controlling the pandemic, including the requirement that all federal employees be vaccinated.
Shell is considering making it mandatory for workers in certain operations to be vaccinated against COVID-19 or risk being made redundant.
Several U.S. airlines have warned of slowing ticket sales and slashed revenue forecasts as the Delta coronavirus variant threatened travel.
(Additional reporting by Noah Browning in London, Naveen Thukral in Singapore and Laura Sanicola in New York; Editing by David Goodman, Mark Potter and David Gregorio)
By Scott DiSavino