Oil edges lower on strong US dollar, mixed supply cues
2 min read
Oil prices slipped in early trade on Tuesday, after falling to a three-week low in the previous session, on a stronger U.S. dollar, rising U.S. bond yields and mixed supply signals.
Brent futures dipped 30 cents to $90.41 a barrel by 0849 GMT, while U.S. West Texas Intermediate crude (WTI) , crept 18 cents lower to $88.64 per barrel. Earlier, prices had been down by about 1 percent.
“(Brent) crude oil prices slid to (around) $90 a barrel as rising US yields and a stronger US dollar dominated market sentiment,” ANZ analysts said in a client note.
“While supply remains tight, higher interest rates means expensive storage of inventories. This could lead to further destocking of oil inventories while increasing spot availability.”
The U.S. dollar (.DXY) on Monday rose to a 10-month high against a basket of major peers after the U.S. government avoided a partial shutdown and economic data fuelled expectations the Federal Reserve will keep rates higher for longer, which could slow economic growth.
Higher interest rates and a stronger dollar makes oil more expensive for holders of other currencies, which could dampen oil demand.
Meanwhile, an announcement by Turkey’s energy minister that the country will restart operations this week on a pipeline from Iraq that has been suspended for about six months further weighed on prices.
“In theory, under the terms of the OPEC+ deal, production (outside the GCC) should remain flat over Q4. However, Iraq’s compliance has been somewhat spotty in the past and export levels should be expected to rise, assuming the pipeline resumes operations as planned,” BMI Research analysts said.
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