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.

Physical markets have been strong thanks to OPEC+ supply curbs and demand holding up better than expected, helping oil to rise by about 25 per cent since its lows in June. The prompt spread in U.S. crude, a reflection of supply and demand at the delivery point for benchmark futures at Cushing, Oklahoma, is near the strongest levels since November.

A snapshot of conditions in China will come on Tuesday with industrial-production figures, including for the refining industry. The country, the world’s largest crude buyer, has been opening new plants, buoying import demand.

Prices:

• WTI for September delivery fell 0.83 per cent to US$82.50 a barrel at 12:12 p.m. in New York.
• Brent for October settlement eased 0.69 per cent to $86.21 a barrel.