Crude oil set for bumpy week as currency volatility hits

Singapore container portSingapore’s container port

Crude oil prices are set for currency-related volatility as a slew of emerging markets and major importers face a stronger U.S. dollar, which makes the commodity more expensive in local currencies, highlighting inflation and balance of payment risks.

Last week, ICE Brent crude oil futures settled up 0.60 percent at US$71.83 a barrel, but down 1.4 percent on the week, while NYMEX West Texas Intermediate dropped 0.7 percent on the day to US$65.91, falling 2.6 percent for the week.

The Chinese yuan is near the red line level of 7 to the dollar and has lost around 10 percent since March on trade tensions with the U.S. China is the world’s top crude importer.

At the same time, the dollar has found support from the Turkish currency crisis and stands at the strongest level in over a year, up 8 percent since mid-April. President Donald Trump on Twitter this week proclaimed money “is pouring into our cherished DOLLAR like rarely before.”

The Argentine peso, South African rand, Russian ruble and Indian rupee are all declining in the Turkish lira’s wake.

Turkey’s markets are closed for most of the week for Eid al Adha. The U.S. Treasury has warned Ankara to expect more economic sanctions unless it hands over detained American pastor Andrew Brunson. A Turkish court on Friday rejected an appeal for his release.

Bullish bets on crude futures and options in London and New York fell by 41,031 contracts to 356,854 in the week to August 14, the Commodity Futures Trading Commission said on Friday. Rigs drilling for oil in the U.S. held steady at 869 last week, Baker Hughes said on Friday.

Ahead, on Tuesday, August 21, the American Petroleum Institute is to publish its weekly update on U.S. oil supplies at 4:30 pm U.S. EDT.

On Wednesday, August 22, the Energy Information Administration will release its weekly report on oil stockpiles at 10:30 am U.S. EDT. On Thursday, August 23, the EIA releases weekly U.S. natural gas storage figures at 10:30 a.m. U.S. EDT.

On Friday, August 24, Baker Hughes will release weekly data on the U.S. oil rig count at 1:00 pm U.S. EDT. Central bank chiefs meet at Jackson Hole, Wyoming this week, with Fed Chairman Jerome Powell scheduled to speak on Friday.

 

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