NEW YORK: Oil prices fell below $90 a barrel on Wednesday, after rising over 1 percent the previous session, on a stronger dollar and after strong economic data renewed concerns over high interest rates.
Brent crude futures fell by 50 cents to $89.56 a barrel at 11:07 a.m. EDT (1607 GMT). US West Texas Intermediate crude (WTI) futures traded at $86.58 a barrel, down 31 cents.
Against a basket of currencies, the dollar was at 104.98, above the six-month high of 104.90 touched overnight. A stronger dollar can weigh on oil demand by making the fuel more expensive for holders of other currencies.
Fueling rate-hike concerns and denting investor sentiment, data on Wednesday showed the ISM non-manufacturing Purchasing Managers’ Index (PMI) came in at 54.5, compared with expectations of 52.5.
“This is fuelling worries about interest rates staying higher for longer, and what does that mean for demand,” said John Kilduff, partner at Again Capital LLC in New York.
Saudi Arabia and Russia on Tuesday extended their voluntary oil cuts to the end of the year, the former to the tune of 1 million barrels per day (bpd) and the latter by 300,000 bpd. These are on top of the April cut agreed by several OPEC+ producers running to the end of 2024.
“The reason the market gave back half of the gains and is listless this morning is because within the language of the joint announcement there is a caveat that these cuts will be reviewed on a monthly basis,” said John Evans of oil broker PVM.
Both countries will review their decisions monthly to consider deepening cuts or raising output, depending on market conditions.
“This flexibility add-in allows for wiggle room, but the market smells a taper,” he said, citing conditions like anti-inflation battles in the US and other countries, whether crude prices near $100 a barrel, or the effect on Saudi oil revenues.
Reflecting near-term supply concerns, front-month Brent futures had traded on Wednesday near 9-month highs at $4.13 a barrel above prices in six months.
US WTI futures’ equivalent spread was as much as $4.88 a barrel, also hovering near nine-month highs.
However, analysts warned that price rises could meet with obstacles as demand may dip when US refineries enter their September-October maintenance period, while potentially higher supply from Iran, Venezuela and Libya could also weigh.
Research company IIR Energy said on Wednesday it expects US oil refiners to increase available refining capacity by 274,000 bpd for the week ending Sept. 8.
Comments
Comments are closed.