The rising risk aversion weighed on stock markets and boosted the dollar. With that, oil dipped more than $1 a barrel to around $74 on Monday. Moreover, after two hurricanes, U.S. Gulf oil output came back online.
The safe-haven U.S. dollar gained as concerns about Chinese property developer Evergrande’s solvency beset equity markets. Additionally, investors were looking to this week’s Federal Reserve meeting for cues about tapering.
Tamas Varga of oil broker PVM said Far East stock markets and the strong dollar are affecting oil. Nonetheless, unless all hell breaks loose, the positive sentiment ought to prevail, he added.
At 1145 GMT, Brent crude fell $1.37, or 1.8%, to $73.97 a barrel. Earlier in the session, it fell as low as $73.75. Meanwhile, U.S. West Texas Intermediate (WTI) pointed down to $1.60, or 2.2%, to $70.37.
As European traders looked for signs that Russia would send more fuel to the region, the continent’s natural gas prices rallied. More Russian supplies would help alleviate the ongoing supply crunch.
Factories in the region were curbing output and U.K. energy suppliers were going out of business.
Benchmark Dutch next-month gas contracts surged as much as 9.9% and the equivalent U.K. contract jumped 5.6%. German next-year power gained 1.1%, while carbon futures lost 1.6%.
Auctions are currently underway for extra gas transportation capacity from Russia into Germany’s Mallnow facility. The result is expected to be available later on Monday.
Analysts at Engie EnergyScan in a note said, whether Gazprom PJSC (OTC:OGZPY) books any additional capacity could give an idea about its strategy for the coming weeks.
A decline in flows into Mallnow on Monday will hint that the Russian producer is favoring building up domestic stocks before the winter.
On Monday morning in Asia, gold dropped to a more than five-week low. While the dollar strengthened, investors awaited the latest U.S. Federal Reserve policy decision.
By 12:14 PM ET (4:14 AM GMT), gold futures fell 0.31% to $1,746.05. It previously hit their lowest level since Aug. 12 at $1,741.8 in the session.
Furthermore, silver fell 1.2% to $22.13 per ounce, after earlier hitting $22.01, its lowest level since November last year. Platinum, which was last down at 2.8% slid to a ten-month low of $907.50, while palladium fell 3.5%.
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