Oil falls with stronger dollar compounding virus risks

Bloomberg

Oil falls alongside a strengthening dollar as near-term risks to the demand recovery emerged ahead of a Opec+ meeting this week to decide on output policy.
Futures in New York fall as much as 2.6%, with the Bloomberg Dollar Spot Index rising to the highest since November, thereby reducing the appeal of commodities priced in the currency. Weaker US equities also weighed on oil prices, while Treasury yields rise.
The market is contending with a spate of near-term setbacks for the outlook in crude consumption. Germany is planning to recommend the use of AstraZeneca Plc’s Covid-19 vaccine only for people over 60 in another threat to Europe’s inoculation campaign, while the head of the US Centers for Disease Control and Prevention warned of “impending doom” as cases and deaths in the country pick up.
“The US dollar continues its rapid ascent, pressuring commodity prices lower with oil and metals taking the brunt of the selling,” said Ryan Fitzmaurice, commodities strategist at Rabobank. The dollar strength “undermines the inflation worries and fears of currency debasement, both of which have been key factors in the renewed commodity index interest this year.”
Oil is poised to close out a fourth quarterly advance on Wednesday as global supplies continue to be whittled down. Organisation of Petroleum Exporting Countries sees the global oil-stockpile surplus built up during the pandemic mostly gone in the next three months, which is earlier than previously forecast. However, the past week has seen volatility climb amid the Suez Canal blockage. All eyes are now on Opec and its allies, whose ministers gather on Thursday to decide output policy for May and possibly beyond, and are expected to maintain tight curbs to deplete global inventories further.
“After some wild moves, we see some stabilisation,” said Hans Van Cleef, senior energy economist at ABN Amro. “With US shale not picking up fast, and prices relatively stable around $60 WTI for the moment, I would not be surprised if Opec+ again indeed decide to roll over for another month.”
At their virtual session, Opec and its partners will consider whether to revive part of the 8 million barrels of daily output — about 8% of global supply — that they’re withholding. At their last gathering earlier this month, the group had been widely expected to return some barrels to the market but, led by Saudi Arabia, opted not to do so given the sustained threat posed by the pandemic.

Brent is probably stuck around $65 a barrel for the time being, according to Torbjorn Tornqvist, chairman and chief executive officer of Gunvor Group Ltd. The continuing spread of Covid-19 in Europe means demand won’t come back as quickly as anticipated and the market has large amounts of spare capacity.
Still, there was bullish news on the supply side, with benchmark North Sea crude loadings for May planned at their lowest level since at least 2007. The decline comes amid summer maintenance, notably on the key Forties grade.
Crude inventories in the US are expected to have declined last week, according to a Bloomberg survey, which would snap a five-week streak of increases if borne out in the U.S. government’s weekly storage data. The American Petroleum Institute will report its figures later Tuesday ahead of the Energy Information Administration’s data.