Oil prices fell more than 1% on Wednesday as a stronger dollar and crude oil storage structures offset the support from the US production cuts caused by Hurricane Ian.
Brent crude futures were down $1.02 per barrel, or 1.2%, to $85.25 as of 0630 GMT, while West Texas Intermediate (WTI) crude futures were down 97 cents, or 1.2%, to $77.53 a barrel.
Both contracts were up over 2% in the previous session.
The dollar hit a new two-year high on Wednesday as rising global interest rates feed recession concerns. A strong dollar reduces demand for oil by making it more expensive for buyers using other currencies.
Asian stock markets sank as rising borrowing costs fueled fears of a global recession, directing investors to the safe-haven dollar.
While Asian markets are falling due to the increase in bond yields, demand outlooks are getting darker due to a possible economic recession.
Traders’ focus is not currently on supply issues as the turmoil in the bond market is sinking risky assets in the stubbornly rising U.S. dollar, which is depressing oil prices.
U.S. crude inventories increased by about 4.2 million barrels in the week ended Sept. 23, while gasoline inventories fell by nearly 1 million barrels, according to figures from the American Petroleum Institute (API) industry group, according market sources on Tuesday.
Distillate stocks rose by about 438,000 barrels, according to sources who spoke on condition of anonymity.
Official Energy Information Administration (EIA) data, which will be released on Wednesday at 20:30 GMT, will provide more reliable information.
Analysts cut their oil price forecast for 2023 amid weak demand and expectations for a stronger US dollar, but global supply disappointments reinforce the long-term bullish outlook.
Producers shut down production ahead of Hurricane Ian, which entered the US Gulf of Mexico on Tuesday and is predicted to be a dangerous Category 4 storm in the warm waters of the Gulf.
About 190,000 barrels per day of oil production, or 11% of the Gulf’s total were shut-in, according to offshore regulator the Bureau of Safety and Environmental Enforcement (BSEE).
Producers lost 184 million cubic feet of natural gas or about 9% of daily production. BSEE said personnel was evacuated from 14 production platforms and equipment.
Ian is the first hurricane this year to disrupt oil and gas production in the U.S. Gulf of Mexico, which produces about 15% of the United States’ crude oil and 5% of its dry natural gas.
Europe is investigating the cause of major leaks into the Baltic Sea from two Russian gas pipelines at the center of an energy crisis, reported Monday.
Germany said it was confident these were not due to natural events or financial exhaustion. The Swedish and Danish prime ministers said the leaks were clearly due to deliberate acts such as sabotage, while the Polish prime minister pointed out the sabotage without showing any evidence.
