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By David Hodari and Benoit Faucon
Commodity prices fell with inventories on Monday, affected by a weakening recovery in fuel demand and a stronger dollar.
Fears that some of the long-blocked Libyan crude would return to the market added to the pressure on oil snoopers. Futures for Brent crude, the international energy benchmark, fell 4% to $ 41.44 a barrel, while US crude futures fell 4.4% to $ 39.31 a barrel.
“Market fundamentals had weakened since August,” said Barclays oil strategist Amarpreet Singh, noting an increase in output from the Organization of the Petroleum Exporting Countries and its allies. The recovery in demand in India, the world’s third largest oil consumer, has also reversed, Singh added.
Losses spilled from industrial products to precious metals. The prior month’s gold futures fell 2.6% to $ 1,901.20 a troy ounce, its lowest close since late July, while silver fell 10% to about $ 24.30 a troy ounce. Those declines were likely triggered by a rise in the US dollar, said Bart Melek, global head of commodity strategy at TD Securities.
Precious metals, like most other commodities, are denominated in dollars and become more expensive for buyers outside of the United States as the currency gains ground. The WSJ Dollar Index, which tracks the US currency against a basket of others, advanced 0.7% on Monday.
The fall in gold also suggests that some investors were selling precious metals to raise cash and meet margin calls in the stock market, according to George Gero, managing director of RBC Wealth Management. The forced sale stimulated the fall in the price of gold during the market crisis earlier in the year.
“This is one of the most serious downdrafts I’ve seen in quite some time,” Gero said. “Silver is suffering a much greater impact because the industrial uses of silver give it a tailwind or against depending on the reopening [of economic activity]. ”
The fall in oil prices prolongs an episode of volatility in the oil market. Demand remains well below the levels of a year ago and traders are increasingly concerned that it is slowing down. OPEC and its allies, meanwhile, have moved to ease the historic restrictions on production they imposed to boost prices earlier in the year.
Libyan exports represent another wild card. The country’s National Petroleum Corporation has restarted production in the east of the country following an agreement over the weekend between the internationally recognized government and renegade Russian-backed commander Khalifa Haftar, who had blocked production there for eight months. .
Libyan officials told The Wall Street Journal that the country’s total production figure would increase by 220,000 barrels a day from Thursday. The deal came amid a nearly decade-long civil war in the North African country. It allowed the state oil company to end force majeure, the legal status that allows a party to breach its contracts for reasons beyond its control, in exports.
Libya produced more than a million barrels of oil a day in 2019, according to the International Energy Agency, but various groups have shut down or sabotaged oil facilities in recent months. In August, Libya produced just 100,000 barrels a day, the IEA said. Libya’s NOC said it will only restart production and exports at facilities that are secure and unoccupied by Russian mercenaries.
Some analysts said the fragile deal in Libya would not derail efforts to rebalance oil supply and demand. A rapid return to full capacity is threatened by “significant uncertainty about the timing, magnitude and sustainability of such an acceleration,” said Damien Courvalin, head of energy research at Goldman Sachs.
Natural gas prices also tumbled Monday amid concerns that Tropical Storm Beta could cause power outages when it hits the Gulf Coast, hurting demand. Henry Hub gas futures fell more than 10% to $ 1.84 per million British thermal units, extending their decline this month to 30%.
–Dan Molinski contributed to this article.
Write to David Hodari at [email protected] and Benoit Faucon at [email protected]
(END) Dow Jones Newswires
September 21, 2020 3:43 PM ET (7:43 PM GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
