Oil on Friday slid by the most in three weeks as a stronger US dollar and weak US economic data stoked concerns over an economic rebound.
The US dollar strengthened, reducing the appeal of commodities priced in the currency. US consumer sentiment cooled more than forecast this month and other economic data such as sluggish retail sales and producer prices also portray the obstacles still facing the country as it emerges from the COVID-19 pandemic.
Meanwhile, US president-elect Joe Biden said that he would ask the US Congress for US$1.9 trillion to fund immediate relief for the US economy, which has been pummeled by the pandemic, but the large price tag and inclusion of initiatives opposed by many Republicans set up the aid package for a drawn out legislative battle.
Photo: Reuters
“We’ve had a lot of strength in a number of different markets and now we’re getting a pullback,” said Bill O’Grady, executive vice president at Confluence Investment Management in St Louis, Missouri.
O’Grady said that oil markets need “driving to go up. If people have money and no place to spend it, it doesn’t make any difference.”
West Texas Intermediate for February delivery fell 2.86 percent to US$52.04 a barrel, down 0.38 percent for the week.
Brent crude for March delivery dropped 2.34 percent to US$55.10 a barrel, down 1.59 percent from a week earlier.
Despite the pullback in oil futures, vaccine breakthroughs and Saudi Arabia’s pledge earlier this month to deepen output cuts are expected to support prices.
JPMorgan Chase & Co said that a “nasty deficit” could emerge in the oil market later this year.
Meanwhile, technical indicators had been flashing warnings signs all week. The 14-day Relative Strength Index for both US and global benchmark crude futures traded above 70 this week in a sign that they were overbought, although both slipped under that level on Friday.
A “short-term pullback” is likely in store for “oil prices, given the recent loss of support from a number of key factors,” Rabobank commodities strategist Ryan Fitzmaurice wrote in a note. “With that said, the dips may be shallow as investor appetite for commodities appears to be increasing rapidly following the recent bullish oil calls and talk of a commodity super-cycle from some of the larger and more prominent US investment banks.”
The market’s structure has also softened. Brent’s prompt timespread dipped back into contango on Friday, a bearish structure where nearby prices are cheaper than later-dated ones.
This week has seen the annual commodity index rebalancing take place — a move that was expected to see as much as US$9 billion flow into the oil market.
Since it began on Friday last week, there has been a surge in so-called trading-at-settlement volumes, an instrument often used by participants with index exposure.
For Brent, average volumes over the past five days have reached a record.
Additional reporting by staff writer
BYPASSING CHINA TARIFFS: In the first five months of this year, Foxconn sent US$4.4bn of iPhones to the US from India, compared with US$3.7bn in the whole of last year Nearly all the iPhones exported by Foxconn Technology Group (富士康科技集團) from India went to the US between March and last month, customs data showed, far above last year’s average of 50 percent and a clear sign of Apple Inc’s efforts to bypass high US tariffs imposed on China. The numbers, being reported by Reuters for the first time, show that Apple has realigned its India exports to almost exclusively serve the US market, when previously the devices were more widely distributed to nations including the Netherlands and the Czech Republic. During March to last month, Foxconn, known as Hon Hai Precision Industry
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and the University of Tokyo (UTokyo) yesterday announced the launch of the TSMC-UTokyo Lab to promote advanced semiconductor research, education and talent development. The lab is TSMC’s first laboratory collaboration with a university outside Taiwan, the company said in a statement. The lab would leverage “the extensive knowledge, experience, and creativity” of both institutions, the company said. It is located in the Asano Section of UTokyo’s Hongo, Tokyo, campus and would be managed by UTokyo faculty, guided by directors from UTokyo and TSMC, the company said. TSMC began working with UTokyo in 2019, resulting in 21 research projects,
Ashton Hall’s morning routine involves dunking his head in iced Saratoga Spring Water. For the company that sells the bottled water — Hall’s brand of choice for drinking, brushing his teeth and submerging himself — that is fantastic news. “We’re so thankful to this incredible fitness influencer called Ashton Hall,” Saratoga owner Primo Brands Corp’s CEO Robbert Rietbroek said on an earnings call after Hall’s morning routine video went viral. “He really helped put our brand on the map.” Primo Brands, which was not affiliated with Hall when he made his video, is among the increasing number of companies benefiting from influencer
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) yesterday expressed a downbeat view about the prospects of humanoid robots, given high manufacturing costs and a lack of target customers. Despite rising demand and high expectations for humanoid robots, high research-and-development costs and uncertain profitability remain major concerns, Lam told reporters following the company’s annual shareholders’ meeting in Taoyuan. “Since it seems a bit unworthy to use such high-cost robots to do household chores, I believe robots designed for specific purposes would be more valuable and present a better business opportunity,” Lam said Instead of investing in humanoid robots, Quanta has opted to invest