Oil Falls as Investors Focus on Growth Gloom
(Bloomberg) -- Oil fell for the first time in a week as concern about the slowing global economy took precedence over geopolitical tensions, while investors waited for clues on the Federal Reserve’s rate-cut path.
Futures in New York declined as much as 0.6% after closing 0.3% higher on Monday. Fed Chairman Jerome Powell is scheduled to testify to Congress on Wednesday and Thursday. The Middle East remained tense as BP Plc kept a ship in the Persian Gulf for fear it might be seized by Iran in retaliation for British forces arresting a vessel carrying the Islamic Republic’s crude last week.
A rally in crude that was mainly driven by the U.S.-Iran standoff faltered last week as investors fretted over the possibility of deteriorating demand even as the Organization of Petroleum Exporting Countries and its allies extend their output curbs. The chances that the U.S. and China will resolve their trade dispute in the near term appear low, so investors are increasingly hoping for monetary stimulus to revive consumption.
“Investors and traders are waiting to hear what direction the Fed will be taking before placing their bets,” said Sungchil Will Yun, a commodities analyst at HI Investment & Futures Corp. in Seoul. “Concerns on the outlook for the global economy seem to be outweighing big events like the Middle East tensions at the moment.”
West Texas Intermediate oil for August delivery fell 23 cents, or 0.4%, to $57.43 a barrel on the New York Mercantile Exchange as of 7:43 a.m. in London after dropping as much as 37 cents earlier. The contract rallied 2.1% from last Tuesday’s close through Monday.
Brent for September settlement lost 18 cents, or 0.3%, to $63.93 a barrel the ICE Futures Europe Exchange. It closed 0.2% lower on Monday. The global benchmark crude traded at a $6.37 premium to WTI for the same month.
Powell’s testimony will be watched closely for an indication of whether the Fed is likely to cut U.S. interest rates at its next meeting on July 31.
British Heritage, the BP-run tanker, is now idling off Saudi Arabia’s coast after it made a u-turn before it was scheduled to pick up crude from Basrah. Iran’s deputy foreign minister said on Sunday he considered the seizure by British forces to be an act of piracy, while a former leader of Iran’s Revolutionary Guard said the Islamic Republic should take a British tanker in response.
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