Oil prices fell on Wednesday, driven by weak demand concerns and a strengthening dollar, although rising geopolitical tensions limited losses.
The March contract for Brent crude oil was down 14 cents, or 0.1%, at $79.41 a barrel by 03:33 GMT. West Texas Intermediate (WTI) crude oil fell 11 cents, or 0.2%, to $74.26 a barrel.
US crude oil inventories fell by 6.67 million barrels in the week ending Jan. 19, according to the American Petroleum Institute (API) on Tuesday. However, the increase in gasoline stocks by 7.2 million barrels increased concerns about fuel demand in the country, which is the world’s largest oil consumer.
The U.S. Energy Information Administration (EIA) will release the data on Wednesday.
The decrease in demand from buyers in other currencies, who had to pay more for oil in dollar terms due to the strengthening US dollar, put pressure on prices.
The dollar index is hovering near a six-week high against major currencies as investors strengthened expectations that the Fed will be in no rush to cut interest rates.
If it weren’t for the current geopolitical tensions, it would be possible for crude oil to be priced meaningfully. Over time, supply risk premiums are expected to decouple from conflict risk, similar to Russia-Ukraine. Except for the rise in the Middle East, crude oil prices are expected to remain in the current range in the first quarter of 2024. No supply loss is expected.
A 24-nation coalition led by the United States and Britain launched new attacks against Houthi fighters in Yemen on Tuesday. Britain’s joint statement stated that the attacks aimed to stop the Houthis’ attacks on global trade.
The United States also launched strikes against Iran-linked militias in Iraq on Tuesday, following an attack on an air base in Iraq that injured US forces.
On the supply side, Libya’s Sharara oil field, with a capacity of 300,000 barrels per day, resumed operations on January 21 after a pause since the beginning of January.
In North Dakota, the third largest oil-producing state in the USA, some of the oil production was restarted after interruptions caused by weather conditions. But production is still as low as 300,000 barrels per day (bpd). In mid-January, production had weakened by 425,000 barrels per day due to extreme cold.
