Oil Drops on Strong Dollar, Turbulence in Turkey
(Bloomberg) -- Oil dropped as economic turbulence in Turkey and the strengthening greenback heightened concerns about global oil demand.
Futures dipped 0.6 percent in New York on Monday, paring some of its losses as the commodity tracked choppy movements in the dollar during the session. Yet, the U.S. currency maintained its advance, reducing the appeal of raw materials as an investment.
In Turkey, an economy that’s larger than the Netherlands or Taiwan, bonds and stocks dropped along with the lira as investor confidence plunged. Meanwhile, OPEC raised production in July and stockpiles at the key Cushing, Oklahoma supply hub in the U.S. are seen rising.
“It’s a strong dollar situation. That reverse correlation is putting pressure on the barrel for starters,” said Bob Yawger, director of futures division at Mizuho Securities USA LLC. “Perceptions about emerging-market demand are also going to be negative for the energy complex.”
The U.S. benchmark crude has declined more than 2 percent this month as international trade disputes threatened to deflate energy demand growth. Turkey’s central bank pledged to “take all necessary measures” to bolster the financial system, lowering the amount commercial lenders must park at the regulator and easing rules governing lira and foreign-currency liquidity.
West Texas Intermediate crude for September delivery slid 43 cents to settle at $67.20 a barrel on the New York Mercantile Exchange. Total volume traded was about 14 percent below the 100-day average.
Brent for October settlement declined 20 cents to end the session at $72.61 a barrel on the London-based ICE Futures Europe exchange, and traded at a $6.04 premium to WTI for the same month.
The Bloomberg Dollar Spot Index rose for a third straight session, advancing as much as 0.3 percent on Monday.
OPEC’s output averaged 32.32 million barrels a day in July, up 41,000 barrels a day from June, the cartel said in a report citing secondary source figures. The group also lifted forecasts for supply from rivals for the rest of the year.
At the same time, in the U.S., the Energy Information Administration sees output at major shale plays rising to 7.52 million barrels a day in September. Meanwhile, Cushing crude stockpiles are seen increasing 500,000 barrels last week, according to a Bloomberg forecast.
“Traders are just pulling the plug,” said Ashley Petersen, lead oil analyst at Stratas Advisors in New York. There were “a lot of fears about the Iran volumes coming off and U.S. supply, but none of those fears have played out.”
Other oil-market news:
Gasoline futures fell 1.2 percent to settle at $2.0147 a gallon. The United States Oil Fund saw a third straight week of withdrawals, with investors removing $1.81 million last week, data compiled by Bloomberg show.
With assistance from Tsuyoshi Inajima, Sharon Cho and Ellen Milligan. To contact the reporter on this story: Jessica Summers in New York at firstname.lastname@example.org. To contact the editors responsible for this story: Reg Gale at email@example.com Debarati Roy, Mike Jeffers.
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