The Energy Chancellor crude oil tanker rides anchor while waiting to enter the Suez Canal in Suez, Egypt. Picture: BLOOMBERG/ISLAM SAFWAT
The Energy Chancellor crude oil tanker rides anchor while waiting to enter the Suez Canal in Suez, Egypt. Picture: BLOOMBERG/ISLAM SAFWAT

London — Oil dropped more than $1 a barrel to below $75 on Monday as rising risk aversion weighed on stock markets and boosted the US dollar, while more US Gulf oil output came back online in the wake of two hurricanes.

The dollar rallied to its highest in a month on Monday as a pending catastrophe at developer China Evergrande added to a cautious mood and as investors braced for the Federal Reserve to take another step towards tapering this week.

“Far East stock markets and the strong dollar are affecting oil,” said Tamas Varga of oil broker PVM. “Nonetheless, unless all hell breaks loose, the positive sentiment ought to prevail.”

Brent crude fell 76cs, or 1%, to $74.58 at 8.15am GMT, having dropped as low as $74.26 earlier in the session. US West Texas Intermediate (WTI) declined 89c, or 1.2%, to $71.08.

A stronger dollar makes US dollar-priced oil more expensive for holders of other currencies and generally reflects higher risk aversion, which tends to weigh on oil prices.

Brent has gained 44% this year, supported by supply cuts by oil cartel Opec and allies and some recovery in demand after 2020’s pandemic-induced collapse.

Oil had gained additional support from supply shutdowns in the US Gulf of Mexico due to the two recent hurricanes, but as of Friday producing companies had just 23% of crude production offline, or 422,078 barrels per day.

“US production in the Gulf of Mexico, which had been shut down as a result of the hurricane, is gradually returning to the market,” said Carsten Fritsch, analyst at Commerzbank.

A rise in the US rig count, an early indicator of future output, to its highest since April 2020 also kept a lid on prices.

Reuters

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