LONDON: Oil prices fell on Wednesday on a stronger US dollar and as weak data from top oil importer China raised demand fears.
Brent crude futures for August delivery were down 73 cents, or 0.99%, to $72.98 a barrel at 1353 GMT. US West Texas Intermediate crude (WTI) fell 90 cents, or 1.3%, to $68.56.
Both benchmarks fell by over $2 earlier in the session and by more than 4% on Tuesday.
Oil slides 4% on worries about US debt ceiling, OPEC+ talks
China’s manufacturing activity contracted faster than expected in May on weakening demand, with the official manufacturing purchasing managers’ index (PMI) down to 48.8 from 49.2 in April. The outcome lagged a forecast of 49.4.
Further pressure came as the US dollar rose, making commodities more expensive for buyers holding other currencies and weighing on oil demand.
The dollar index, which measures the US unit against six major peers, saw support from cooling European inflation and progress on a bipartisan US debt ceiling bill, which will advance to the House of Representatives for debate on Wednesday.
The dollar could add to recent gains if Friday’s US May non-farm payrolls number is stronger than expected and raises the probability of the Federal Reserve raising rates again in June.
Market players are preparing for the upcoming June 4 meeting of OPEC+ - the Organization of the Petroleum Exporting Countries and allies including Russia.
Mixed signals by major OPEC+ producers on whether or not the group will decide to further cut oil production have sparked recent volatility in oil prices.
Despite the latest pullback in prices, banks HSBC and Goldman Sachs and analysts do not expect OPEC+ to announce further cuts in the upcoming meeting.
HSBC said on Wednesday that stronger oil demand from China and the West from the summer onwards will bring about a supply deficit in the second half of the year.
“The most likely action is inaction,” said PVM oil market analyst Stephen Brennock, regarding the OPEC+ decision.
Separately, US crude oil and gasoline stockpiles were seen falling last week, while distillate inventories likely increased, a preliminary Reuters poll showed on Tuesday.
The poll was conducted ahead of reports from the American Petroleum Institute, an industry group, due at 4:30 p.m. EDT (2030 GMT) on Wednesday.
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