By Peter Nurse
Investing.com — Oil prices sold off sharply Monday, as rising risk aversion boosted the U.S. dollar ahead of this week’s important Federal Reserve meeting.
By 9:45 AM ET (1345 GMT), futures were down 1.3% at $70.86 a barrel, while futures were down 0.9% at $74.63 a barrel, falling for the second consecutive session.
U.S. Gasoline RBOB Futures were down 1.4% at $2.1415 a gallon.
Market sentiment has turned more risk averse this week, with equity markets sharply lower following worries about contagion from Chinese property developer debt problems.
As a result, the U.S. dollar, seen as a safe haven, climbed to a month-high, making commodities priced in the currency such as oil less attractive to investors.
Adding to the concerns is the upcoming two-day , concluding on Wednesday, which could see the central bank taking another step toward tapering its massive pandemic-era bond-buying program.
“A tapering announcement this week would likely put some downward pressure on oil and the broader commodities complex,” said analysts at ING, in a note.
While the focus has turned elsewhere, supply is increasing in the U.S., the largest consumer in the world.
The country’s rose by nine to 512 in the week to Sept. 17, Baker Hughes said on Friday, its highest since April 2020 and double the level from this time last year.
Additionally, only 23% of U.S. Gulf of Mexico crude output remained offline as of Friday, or 422,078 barrels per day, an improvement from the 28% seen on Thursday, more than two weeks after Hurricane Ida hit.
There was some potential good news for the energy markets Monday, with the Financial Times reporting that the United States is set to relax travel restrictions for passengers arriving from Europe and the U.K. if they are fully vaccinated. This should boost demand for seats, and in turn demand for aviation fuels as airlines cater to the increased demand with additional flights.
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