Oil prices fell on a stronger dollar and hints of profit-taking following a July rise in which investors banked on tighter global supply and increased demand in the second half of 2023.
On Tuesday, October Brent crude futures finished at $84.91 a barrel, down 52 cents or 0.6%. Brent settled at its highest level since April 13 on Monday.
West Texas Intermediate oil futures in the United States closed at $81.37 per barrel, down 43 cents, or 0.5%, from the previous session’s level, which was the highest since April 14.
“Crude is moving in a corrective phase this morning, prompted by a sharply higher U.S. dollar index and satisfying the ‘overbought’ market situation,” said Dennis Kissler, senior vice president of trading at BOK Financial.
The dollar index, which measures the value of the US currency versus six major currencies, increased by 0.40%. A rising dollar raises the cost of petroleum for investors holding other currencies.
According to market sources citing American Petroleum Institute estimates on Tuesday, crude oil stockpiles in the United States decreased by around 15.4 million barrels in the week ended July 28. Analysts had predicted a 1.37 million barrel decline.
Gasoline inventories declined by nearly 1.7 million barrels, compared to a 1.3 million-barrel drop predicted. Distillate inventories declined by roughly 510,000 barrels, falling short of analysts’ expectations of a rise of 112,000 barrels.
Crude futures rose in post-settlement activity as a result of the inventory report. Brent rose 32 cents, or 0.4%, to $85.75, while US crude futures rose 40 cents, or 0.5%, to $82.22 in light trading.
To jump-start China’s private sector amid a sluggish economic recovery following a long period of COVID restrictions, Chinese ministries, regulators, and the central bank vowed extra funding assistance to small firms on Tuesday.
Meanwhile, statistics released on Monday revealed that manufacturing activity in the eurozone dropped at the sharpest rate since May 2020, dampening expectations.
On the supply side, Saudi Arabia is anticipated to extend its voluntary cuts through September at this Friday’s OPEC+ meeting, significantly reducing supplies.
According to a Reuters survey, OPEC oil output dipped in July after Saudi Arabia made an additional voluntary cut as part of the OPEC+ producer group’s latest deal to support the market, while a Nigerian outage curtailed supply.
At a conference on Monday, BP (BP. L) CEO Bernard Looney predicted that oil demand growth would continue into next year and that OPEC+ would become more disciplined.
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