Oil drops from multi-year highs on firmer dollar, increase in UK COVID cases
- US dollar rises after Fed rate signal
- Britain reports biggest daily increase in COVID cases since February
- Iran surrenders presidential elections on Friday
- US-Iran nuclear talks harden if Iranian hardline Raisi wins
SINGAPORE, June 17 (Reuters) – Crude oil prices fell nearly 2% from their highest level in years on Thursday as the dollar strengthened after the US Federal Reserve signaled it could increase interest rates from 2023.
Concerns over oil demand resurfaced after new cases of the coronavirus surged in Britain, while supply concerns over the return of Iranian barrels also weighed on the market.
Traders, however, said Friday’s presidential elections in Iran could derail nuclear talks between Washington and Tehran and leave US sanctions in place on Iranian oil exports.
Brent futures fell $ 1.31, or 1.8%, to $ 73.08 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 1.11 $, or 1.5%, to come to $ 71.04.
On Wednesday, Brent stood at its highest since April 2019 and WTI at its highest since October 2018. Even though Thursday’s declines were the largest daily percentage declines since May, both benchmarks were still up over 40% so far this year.
The US dollar strengthened to its highest since mid-April against a basket of other currencies (.DXY) after the Fed signaled it could raise interest rates at a much faster pace than planned. Read more
A firmer greenback makes oil more expensive in other currencies, which could reduce demand.
Britain on Thursday reported its biggest daily increase in new COVID-19 cases since February 19, according to government figures which showed 11,007 new infections, up from 9,055 the day before. Read more
“This increase in the number of COVID cases in the UK despite rapid vaccinations will set off many alarms as to how quickly the rest of Europe will reopen,” said Edward Moya, senior market analyst at OANDA, noting that “Crude could be ripe for further profit taking if more optimistic comments come from the latest round of Iran nuclear talks.”
Indirect talks between Tehran and Washington on relaunching the 2015 Iran nuclear deal are closer than ever to a deal, but key issues remain to be negotiated, Iran’s top negotiator said Thursday. Read more
Iran heads to presidential elections on Friday, with outright judicial leader Ebrahim Raisi among the favorites. Read more
“It is very possible that the nuclear negotiations will fail if a deal is not reached by August (when) the current reformist president Hassan Rouhani leaves the government,” said Bob Yawger, director of energy futures at Mizuho At New York.
Washington sanctioned Raisi for his alleged involvement in the executions of political prisoners. His election would make it more difficult for the United States and Iran to reach an agreement on Iran’s uranium enrichment that would allow the lifting of US sanctions on Iranian oil exports. Read more
Analysts have said Iran could increase its oil supplies by 1 to 2 million barrels per day (bpd) if sanctions are lifted. Read more
Another drag on crude prices has been the decline in the US 3-2-1 and gasoline crack spreads – a measure of refining profit margins – to their lowest since February due to recent weakness. product markets.
US gasoline inventories rose an unexpectedly 2 million barrels last week. Analysts predicted gasoline inventories would decline by 600,000 barrels.
Reporting by Jessica Jaganathan; Editing by Ana Nicolaci da Costa
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