Oil futures moved lower Monday as traders watch efforts in Washington to craft another round of rescue spending and assess the continued spread of COVID-19, even as a persistent slide in the U.S. dollar helped to limit losses for prices.
“Marginal losses are to be expected, as deteriorating market confidence continues to manifest itself through a boost in safe-haven flows, especially gold,” Bjornar Tonhaugen, head of oil markets at Rystad Energy, said in emailed commentary. “In lack of larger fundamental news, oil prices are following the overall macro trends, behaving as a ‘risky asset’ and being traded lower when safe-haven assets strengthen.”
West Texas Intermediate crude for September delivery on the New York Mercantile Exchange was down 63 cents, or 1.5%, at $40.6 a barrel. September Brent crude, the global benchmark, fell 68 cents, or 1.6%, to $42.66 a barrel on ICE Futures Europe.
“On the one hand, the risks of a less robust recovery of demand due to coronavirus, and the political tensions between the U.S. and China, are weighing on prices,” said Eugen Weinberg, analyst at Commerzbank, in a note. “And on the other, prices are finding support from the weak U.S. dollar and hopes of further corona aid in the U.S.”
The number of confirmed cases of COVID-19 world-wide climbed above 16.2 million on Monday, according to data aggregated by Johns Hopkins University, and the death toll rose to 648,966. The U.S. case tally climbed to 4.23 million and the death toll rose to 146,935.
The dollar, meanwhile, remained under pressure, with the ICE U.S. Dollar Index, which tracks the currency against a basket of six major rivals, sliding to a roughly two-year low. A weaker dollar can be supportive for commodities as it makes them less expensive to users of other currencies.
U.S.-China tensions were on the rise last week, with Beijing ordering the U.S. to close its consulate in the western Chinese city of Chengdu, days after Washington ordered the closure of China’s Houston consulate. Meanwhile, on the domestic front, Senate Republicans were expected later Monday to release their proposal for a second round of coronavirus spending, news reports said.
“Some COVID-19 pessimism is still around and news of uncomfortably high new coronavirus cases in key U.S. states and new cases in China and Hong Kong…add fuel to the fire of sentiment woes,” said Rystad’s Tonhaugen.
“A wild card is also how U.S.-China tensions will evolve, will the current spat end with the closure of the two consulates or will trade be affected,” he said. “Traders are pricing in some downside from this as if the political rift escalates oil demand could take a hit from its rollover consequences to fuels use.”
Oil prices had spent some time early Monday trading higher, buoyed by the weakness in the dollar. Prices also found support as traders watched for any disruptions to crude and natural-gas production in the Gulf of Mexico after Hanna, which hit the South Texas coast as a hurricane over the weekend.
The port of Corpus Christi “looks to have been largely spared extensive damage, but nevertheless we can expect some disruption of trade in the near term, although this appears to have had limited impact on crude and product prices,” wrote analysts at JBC Energy, a Vienna-based consulting firm.
On Nymex, August natural gas fell by 1.9% to $1.774 per million British thermal units, ahead of the contract’s expiration Wednesday. August gasoline shed 2.4% to $12547 a gallon and August heating oil lost 1.3% to $1.2398 a gallon.