Global crude oil prices dropped amid the strengthening US dollar and growing expectations that supply will improve as oil prices cross pre-pandemic levels.
Brent crude futures dipped by $0.18, or 0.3%, to reach $66.70 a barrel while the US West Texas Intermediate (WTI) crude futures reduced by $0.36, or 0.6%, to settle at $63.17 a barrel, reported Reuters.
National Australia Bank commodity research head Lachlan Shaw was cited by the news agency as saying: “Bonds are selling off reasonably aggressively and the US dollar has firmed this morning. That’s providing a bit of a headwind for crude oil this morning.”
Brent and WTI were on track to reach about 20% this month although oil prices have declined. This is due to the US supply disruptions and optimism for demand improvement with the rollout of the Covid-19 vaccine.
Investors expect the upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, could result in increased supply to the market. The meeting is scheduled for next week.
Shaw added: “The stakes at play this time around are particularly large (for OPEC+) insofar as oil prices have more than recovered to pre-pandemic levels, global inventories are continuing to trend down, and vaccine rollouts are accelerating.
“The market’s probably right to think at this price level and given what the fundamentals are doing, there’ll be more supply coming into the market over time.”
As a result of the winter storm last week, the US has halted production of approximately four million barrels per day of capacity due to the closure of several Gulf Coast facilities.
JP Morgan analysts were cited by the news agency as saying that the US is expected to take until 5 March to resume the closed capacity despite the risk of delays.
The analysts said: “The greater concern to US crude oil market participants should be the recovery of refinery demand.
“As refiners assessed the damage to their facilities, it became clear that the road to recovery would be weeks rather than days.”