LONDON: Brent crude oil dipped more than $1 a barrel to around $124 on Tuesday as the dollar rose from a three-year low and India raised interest rates in an attempt to battle inflation.
The dollar index, which tracks the dollar against a basket of major currencies, was up 0.2 percent but still not far from a near three-year low.
‘Prices are still down, and that's probably because the dollar strengthening is weighing on prices,’ said Serene Lim, a commodities analyst with ANZ Bank in Singapore.
Brent crude for June was down $1.45 to $123.67 a barrel by 1407 GMT. US crude lost $1.20 to $112.32. Brent had earlier dipped to $122.88.
Michael Hewson, an analyst at CMC Markets, cited India's decision to raise interest rates by a larger-than-expected 50 basis points in an attempt to battle inflation as a factor in oil's retreat.
‘There are concerns that higher interest rates could be a growth killer and that could be what is weighing down oil prices. India is one of the biggest emerging economies where a lot of global growth will come from.’
Analysts said the potential for retaliatory attacks following the death of al Qaeda leader Osama bin Laden, and continued turmoil in the Middle East, would support the market.
‘The risk premium could even rise again if acts of revenge follow,’ said analysts at Commerzbank in a report. ‘As long as the unrest continues in Arab countries, the price of oil should not fall significantly in any case.’
Oil investors will also keep an eye on the latest US oil inventory figures later this week.
US crude oil inventories probably increased last week as imports outpaced refinery demand, a Reuters poll showed ahead of weekly industry and government reports.
On average, crude stocks were forecast to rise 1.9 million barrels in the week to April 29.
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