- Shrinking US crude inventories fail to allay demand concerns
- Blinken left the Middle East Tuesday without a cease-fire deal
Oil extended its decline to the lowest in more than six months as trend-following algorithmic sellers overlooked a bullish US stockpile report.
West Texas Intermediate fell 1.7% to settle below $72 a barrel, the lowest price since January. Momentum-driven trading has exacerbated a recent selloff that pushed prices down more than 5% in the last three sessions. The extended declines were led by losses in the refined products markets, with gasoline futures falling 2.3%.
US crude prices falling below $72 a barrel catalyzed commodity-trend following algorithms to liquidate 7% of their maximum size, said Dan Ghali, a commodity strategist at TD Securities.
Earlier, prices rallied to intraday highs after US crude supplies fell 4.65 million barrels to the lowest since January. While the drawdown signals tightness in the physical market, the data didn’t allay concerns about lackluster demand in the US and China.
Progress toward a cease-fire in the Middle East has also weighed on crude futures in recent days. US Secretary of State Antony Blinken left the Middle East late Tuesday without an accord, but reiterated that Israel had agreed to a “bridging” deal to create space for the two sides to hammer out details. Options markets also are signaling an easing of concerns over hostilities in the Middle East.
Investors are also watching US economic data as lower inflation could lead the the Federal Reserve to ease interest rates — a boon to wider energy demand. Fed Chair Jerome Powell is set to speak at the central bank’s symposium in Jackson Hole, Wyoming, later this week.
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Written by: Julia Fanzeres — With assistance from Alex Longley @Bloomberg
The post “Oil Slumps to January Lows in Algorithmic-Led Selloff” first appeared on Bloomberg