After three weeks of gains, there was a reminder Friday that oil prices can fall and fall sharply when the news cycle turns and COVID re-emerges as a big worry – not that it has gone away.
And it was a similar story for gold, copper and silver, but iron ore prices edged higher on Friday.
A rising US dollar didn’t help.
But the oil market has been living in another world where COVID and its impact on energy demand, has been banished by vaccinations that have yet to be administered, where planes are flying, cars driving and oil and gas companies making out like bandits.
That’s regardless of the reality in the US and Europe – on a day when the global death toll went past two million, France tightened its lockdown and lengthened its curfew.
Germany is looking to make its restrictions tougher and an outbreak in China grew with regions containing more than 28 million people now lockdown to try and prevent an escalation of infections in the only global economy showing decent economic growth.
Prices of Brent and US West Texas Intermediate both dipped more than 2% felly with both contracts posting a loss on the week as those concerns about Chinese cities in lockdown and offset confidence from China’s December and 2020 trade data which showed a record year for inbound oil shipments (due to a buying splurge in March, April and May when prices were at record lows).
Traders ignored the fall in December imports – the third in a row – because of a glut in supplies and storage problems.
Brent fell $US1.32, or 2.3%, to settle at $US55.10 a barrel. West Texas Intermediate crude settled down $US1.21, or 2.3%, at $US52.36 a barrel.
Both benchmarks, which hit their highest in nearly a year earlier in the week, posted their first weekly declines in three weeks, with Brent down 1.6% on the week and WTI off 0.6%.
China reported the highest number of daily COVID-19 cases in more than 10 months on Friday, capping a week that has resulted in more than 28 million people under lockdown as it suffered its first coronavirus death on the mainland since May.
“The COVID-19 pandemic’s spread is taking centre stage again and traders are getting increasingly worried about the long duration of European lockdown and about the new restrictions (in) China,” Bjornar Tonnage from Rystad Energy told Reuters.
“The market is structurally bullish, but it may be getting too ahead of forward-looking fundamentals,” he was quoted as saying.
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Gold, silver, platinum and copper all sold off on Friday as the dollar continued its upturn after the $US1.9 trillion stimulus package.
The US dollar index rose 0.573% as the size of the Biden package (which still has to go through the now Democrat-controlled US Congress) confused traders.
Some went the usual ‘inflation is back/looms’ route but the more sensible pointed to the worsening COVID infections and deaths and the weakening health of the US economy with retail sales in December down for the third month in a row with a fall of 0.7%, half the revised 1.4% (original 1.1% reported) fall in November.
Gold fell more than 1%, silver over 3, and copper fell more than 1.7%. Platinum shed almost 4%.
Comex gold for February delivered ended the week on $US1,827.30, down more than $US23 an ounce for a loss of 1.2% for the week. Silver ended at $US24.83 and copper finished at $US3.60.
Silver lost 2.6% for the week and copper dropped 2.5%.
Iron ore prices were higher on Friday – the price of 62% Fe fines delivered to northern China rose to $US173.69, a gain of $1.33 a tonne. That was a rise of just 63 US cents over the week 0nothing really.
The price of 65% Fe fines (from brazil) rose 60 cents on Friday to $US194.90. That was up $US2.90 a tonne over the week.
