HOUSTON: Oil prices edged lower on Tuesday on a stronger dollar and signs of profit-taking, after rallying in July when investors wagered on tightening global supplies and demand growth in the second half of the year.
Brent crude futures for October were at $84.80 a barrel at 11:30 a.m. ET (1530 GMT), down 63 cents or 0.7%. Front-month Brent settled at its highest since April 13 on Monday. US West Texas Intermediate crude futures were at $81.15 a barrel, down 65 cents or 0.8% from the previous session’s settlement, which was its highest since April 14. “Crude is moving in a corrective phase this morning, prompted by a sharply higher US dollar index and satisfying the ‘overbought’ market situation,” said Dennis Kissler, senior vice president of trading at BOK Financial.
The dollar index, a measure of the greenback against six major currencies, rose 0.412%. A stronger dollar makes crude more expensive for investors holding other currencies.
PVM analyst Tamas Varga noted that for months, predictions have been made that global oil demand will grow in the second half of 2023 versus the first half, in tandem with supply cuts to reduce global oil inventories. Recession worries made investors more cautious earlier in the year, he said.
“Then July arrived and the mood has promptly changed,” he added, citing the action of central banks that has investors more confident that a “soft landing” is achievable and recession avoidable in major economies.
The latest figures from the US- the world’s biggest fuel consumer - showed fuel demand rose the highest level since August 2019. A Reuters poll also estimated US crude oil and gasoline stockpiles were expected to have declined last week.
To revive the private sector amid a flagging economic recovery following a protracted period of COVID restrictions, Chinese ministries, regulators and the central bank on Tuesday pledged more financing support to small businesses.
Meanwhile, data released on Monday showed manufacturing activity in the euro zone contracted in July at the fastest pace since May 2020, tempering enthusiasm. On the supply side, this Friday’s OPEC+ meeting is expected to see Saudi Arabia roll its voluntary cuts through September, further tightening supplies.
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