Oil prices fell on Friday as a collapse in bond prices led to gains in the U.S. dollar, and expectations grew that more supply is likely to return to the market with oil prices back above pre-pandemic levels.
U.S. West Texas Intermediate (WTI) crude futures dropped 96 cents, or 1.5%, to $62.57 a barrel at 0804 GMT, giving up all of Thursday’s gains.
Brent crude futures for April, which expire on Friday, fell 86 cents, or 1.3%, to $66.02 a barrel, following a 16 cent loss on Thursday.
Rising Expectations for oil supply
Despite the drop in oil prices today, both Brent and WTI are on track for gains of about 20% this month, as markets have grappled with supply disruptions in the United States, while optimism has built for demand to improve with vaccine rollouts.
Investors are betting that next week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, will result in more supply returning to the market.
The U.S. crude prices have also faced headwinds from the loss of refinery demand after several Gulf Coast facilities were shuttered during the winter storm last week.
The refining capacity of about 4 million barrels per day (BPD) is still shut, and it may take until 5th March for all of the shut capacity to resume, though there is a risk of delays, analysts at J.P. Morgan said in a note this week.