(Bloomberg) — Oil snapped a four-day gain as a key U.S. pipeline restarted and China said that it would push back against elevated commodity prices.
West Texas Intermediate lost 1.3%, after closing Wednesday at a two-month high, while Brent fell. The Colonial Pipeline Co. — a key source of gasoline for the East Coast — is returning to service after a cyberattack last Friday. That’ll bring relief to motorists after panic-buying emptied out some gas stations.
China Premier Li Keqiang urged the country to deal effectively with the commodity price surge and its impact, according to a state television report, echoing previous comments from officials. Asia’s top economy is a key user of of raw materials, and copper and iron ore also lost ground on Thursday.
Oil is a among commodities that have rallied hard this year as investors wager that the economic recovery from the coronavirus outbreak will spur consumption. The roll-out of vaccines in the U.S., Europe and China has allowed governments to pare back social-distancing measures, permitting a return to work and much greater mobility. Still, Covid-19 flare-ups in many parts of Asia, as well as pushback from China, have complicated the global picture.
“The moves today feel like a consolidation phase, there may also be some investors removing bullish trades following the resumption of the Colonial pipeline,” said Daniel Hynes, senior commodities strategist at Australia and New Zealand Banking Group Ltd. “But ultimately, strong demand globally should keep the uptrend intact.”
On Wednesday, a U.S. government report showed domestic oil inventories fell to the lowest since late February, adding to signs of market rebalancing. In addition, the International Energy Agency said the world has now largely worked off the surplus that accumulated when the pandemic routed demand.
Separately, Yemen’s Shiite Houthi rebels claimed a drone and missile attack against targets in Saudi Arabia including oil facilities, according to a statement on a rebel-run television channel. Such attacks have risen this year, though they rarely cause much damage.
Brent’s prompt timespread was 18 cents a barrel in backwardation. While that remains a bullish pattern — with near-term prices above those further out — it has dropped to the lowest level since late March.
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