Oil stocks are falling today as oil prices are dropping slightly and remain below $100 per barrel. Among the factors being blamed for oil’s weakness are the anti-Covid-19 measures being implemented in China, the rising value of the U.S. dollar, the upcoming interest rate hike by the Federal Reserve, signs of lower U.S. demand for oil, and worries about a new omicron subvariant of the Covid-19.
In morning trading, the price of West Texas Intermediate (WTI) crude oil fell 1,85% to $94.40. Among oil stocks in premarket trading, Occidental Petroleum (NYSE:OXY) lost 0.9% to $57.48, Exxon Mobil (NYSE:XOM) dropped 2% to $83, and Chevron (NYSE:CVX) gave back 2% to $135.
China’s Anti-Covid-19 Measures and the Strong Dollar
Beijing is implementing anti-coronavirus measures in multiple cities, and “China’s daily crude oil imports in June sank to their lowest since July 2018,” Reuters reported.
Meanwhile, the U.S. dollar has been very strong against most major foreign currencies. When the U.S. dollar strengthens, crude oil prices tend to decline.
The Fed, Lower U.S. Oil Demand, and New Covid-19 Worries
Oil traders believe that the large Fed rate hike expected later this month will reduce the country’s demand for oil, which already appears to be dropping. On July 12, the Energy Information Administration (EIA) reported that U.S. oil inventories increased and that production was forecast to continue to increase throughout 2022.
Further, the White House is warning that a new subvariant of the omicron Covid-19 mutation “might be better at escaping immunity, including from prior infections.” The news may be causing traders to speculate that new anti-coronavirus measure could be taken in the U.S.
Also worth noting is that President Joe Biden is expected to travel to Saudi Arabia tomorrow to ask the Saudis and their Gulf allies to release more oil onto world markets.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
