Crude oil prices may start week on back foot on emerging market currency concerns

U.S. two-dollar billsPhoto by Leslie Shaffer

Crude oil prices could start the week on the back foot in Asia on Monday as concerns over emerging market currencies, sparked by sharp falls in the Turkish lira and Russian ruble, weigh on demand views for the commodity, which is priced in dollars.

Nymex WTI crude oil futures for September were up 0.27 percent at US$67.81 a barrel at 8:01 A.M. SGT, up from levels as low as US$66.81 last week, while ICE Brent crude futures for October were up 0.12 percent at US$72.90 a barrel, up from levels as low as US$72.07 last week, according to Bloomberg data.

The Turkish lira dropped to as low as 7.2149 against the dollar in early Asia trade on Monday as the U.S. imposed economic sanctions related to a dispute over Ankara’s detainment of a pastor. The lira is down over 30 percent in August. Fresh sanctions on Russia over the suspected link to an attack in the U.K. on a former Russian spy saw the ruble drop to 68.3291 to the dollar in early Asia trade on Monday, the weakest since early 2016.

Russia is a the world’s top oil producer and is a major exporter, while Turkey is a major importer and also a significant transit hub for crude. In both cases, however, the emerging market-linked vulnerability of economies dependent on dollar trade has raised concerns of a spillover that could weaken currencies for major crude buyers, such as India and China, as well as other nations in Asia, such as Indonesia and Thailand.

Elsewhere, data on Friday from the U.S. showed oil drillers added 10 rigs last week to bring the total to 869, the most since March 2015, Baker Hughes said. Bullish bets on combined crude futures and options in London and New York fell by 9,117 contracts to 397,885 in the week ended August 7, the U.S. Commodity Futures Trading Commission said on Friday. Net-long positions in Brent crude were cut by by 18,441 contracts to 353,905 in the same week.

Ahead this week, on Monday, the Organization of the Petroleum Exporting Counties, or OPEC, publishes its monthly oil market assessment, which comes after the International Energy Agency on Friday said in its monthly outlook that Iran’s output continued to fall last month, highlighting the scope for tighter oil markets when re-imposed U.S. sanction on Tehran fully resume in early November.

On Tuesday, the American Petroleum Institute publishes its estimates of weekly U.S. inventories at 4:30 p.m. U.S. EDT followed on Wednesday at 10:30 a.m. U.S. EDT by official figures from the U.S. Energy Information Administration, which will release its weekly report on oil stockpiles.

On Friday, Baker Hughes will release weekly data on the U.S. oil rig count at 1:00 p.m. U.S. EDT.

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