Crude oil prices take another spin lower

By: AFP      Published: 10:58 PM, 7 Jul, 2021
Crude oil prices take another spin lower

Oil prices posted another choppy session Wednesday as some traders booked profits while waiting to see if OPEC and friends could reach a deal on raising output, analysts said.

Stock markets edged higher meanwhile as investors looked ahead to minutes from the Federal Reserve's last policy meeting for clues on future interest rate hikes.

Most Asian stock markets closed lower earlier in the day as concerns lingered over the economic recovery and China's widening crackdown on tech firms.

In New York, the Dow Jones index was modestly higher in midday trading.

The market for crude oil has been volatile since talks between OPEC members and 10 other major producers failed to reach agreement on a plan to boost crude supply as global economies recover from the coronavirus pandemic.

A surge by the virus' Delta variant has also raised questions about that recovery.

"Investors have realised that there will be lots of uncertainty about the OPEC's output policy in coming months and there is a small risk that the whole agreement could collapse, potentially leading to another price war," said Fawad Razaqzada, an analyst at ThinkMarkets.com.

As was the case on Tuesday, oil prices rose in early exchanges before changing course and plunging later on.

If the United Arab Emirates rejects the so-called OPEC+ agreement, it might provide markets with more oil than expected, driving prices even lower.

"In the coming months, the oil market rally was likely to reverse anyway. That process may have already started," Razaqzada remarked.

On stock exchanges meanwhile, traders were waiting to see if strong inflation caused by the reopening of economies would push the Fed and other central banks to tighten borrowing costs sooner than expected, which in turn could slow the recovery.

Minutes from the Fed meeting might "provide hints of potential changes in the monetary policy in the short term. Having said that, the minutes are expected to stay dovish as inflation remains under control and the (US) labour market grows at a sustainable pace", noted Naeem Aslam, chief market analyst at AvaTrade.

In Asian stocks trading, Shanghai closed higher but Hong Kong fell, with concerns over China's removal of the ride-hailing firm Didi Chuxing from app stores.

In Europe, British financial technology firm Wise entered the London stock market, valued at £8.0 billion ($11.1 billion, 9.3 billion euros), in a key post-Brexit test for the sector.