Oil retreated for a third day to trade below $65 a barrel, with a firmer dollar capping prices.
West Texas Intermediate fell 1.5%, while Brent also dropped. On Monday, WTI’s nearest timespread slipped into a bearish contango structure, signaling a short-term oversupply, though the rest of the curve remains in a bullish backwardation. The dollar held a two-day gain that made crude more expensive for holders of other currencies.
Oil’s been on a strong run as supply cuts from OPEC and its allies tighten the market and expectations grow for a rebound in travel over the northern hemisphere’s summer. But there are mixed signs emerging as Iranian oil flows heavily to China and the pace of coronavirus vaccinations remains uneven across the globe.
“The market is now immediately looking for physical clues as an explanation to this front-end weakness,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “In the background though, Covid-19 vaccines keep being rolled out and global oil demand in general and the U.S. specifically keeps rebounding.”
|WTI lost 1.5% to $64.43 a barrel at 10:06 a.m. in LondonBrent also fell 1.5% to trade at $67.84|
In the U.S., coronavirus cases rose last week at the slowest pace since the pandemic began. At the same time, retail gasoline sales increased to just 1% below year-ago levels, according to GasBuddy. That’s good news for an industry that relies on the busy summer driving season to buoy profits.
In a contango, near-term prices trade below those further out, a bearish pattern that suggests oversupply. In the U.S., drillers are pumping again following last month’s freeze, and nationwide stockpiles of crude have been expanding. In contrast to WTI, Brent’s prompt timespread is 54 cents a barrel in backwardation, a bullish pattern that points to near-term tightness.