Oil prices fell in Asian trade on Thursday after the US dollar strengthened on expectations of rate hikes and the latest economic data from the US and China did not do enough to encourage expectations that demand will improve.
Brent crude futures were down 78 cents, or 0.94%, to $82.34 a barrel at 0615 GMT. West Texas Intermediate crude oil (WTI) futures fell 95 cents, or 1.20%, to $78.21.
Both benchmarks fell for the second day after Wednesday’s drop of 2%, and are at their lowest since OPEC+ announced its surprise production cut on April 2.
The strong USD weighed on oil markets this week as bond yields start to climb again and the prospects for the Fed’s continued rate hikes become stronger.
The US dollar index is up about 0.40% over the course of this week. A stronger dollar makes oil more expensive for holders of other currencies.
WTI crude is below $80 again and the strengthening dollar contributes to the decline.
Although China reported better-than-expected GDP data, both industrial production and fixed asset investment lagged behind the consensus data, which did not help oil prices rise.
U.S. economic activity has changed little in recent weeks as employment growth has slowed somewhat and price increases appear to have slowed, according to a report by the Federal Reserve Bank on Wednesday.
The market ignored the relatively bullish EIA inventory report. These volatile markets are raising recent concerns that monetary tightening is weakening oil demand.
According to the U.S. Energy Information Administration (EIA), U.S. crude inventories fell by 4.6 million barrels last week as refinery activities and exports surged, while gasoline inventories rose unexpectedly amid disappointing demand.
The drop in crude oil inventories was much more than analysts’ estimate of 1.1 million barrels and the American Petroleum Institute’s (API) estimate of 2.7 million barrels on Tuesday.
On the supply side, oil shipments from Russia’s western ports in April are likely to rise to over 2.4 million barrels per day, the highest since 2019, despite Moscow’s commitment to curb production, trade, and shipping.
