Oil’s seven-week rally sputters as summer trading thins

Oil’s seven-week rally fizzled amid a slump in summertime liquidity, leaving the commodity at the mercy of volatile, broader markets.

While signs of tightening physical supplies had in recent weeks pushed crude futures to the longest streak of gains in a year, West Texas Intermediate on Monday see-sawed in tandem with Wall Street on fresh concerns about China’s economy. Open interest in U.S. crude is hovering near the lowest levels this year as investors travel during the summer.  

“Crude prices are softer as the dollar rallies and concerns percolate with China’s property sector, which will be a drag on global growth conditions,” said Ed Moya, senior market analyst at Oanda. “The market is a little illiquid here, which means if the bond market sell-off intensifies, we could see significant dollar strength that weighs on crude prices,” he added.

Also dampening sentiment was the expectation that progress in Iran-US relations would lead to higher oil exports from the Middle Eastern country.