Oil prices skid 2% as dollar gains on potential Fed rate hike

NEW YORK: Oil prices slid about 2% to a two-week low on Wednesday (April 19) despite a sharp decline in US crude inventories, as the dollar strengthened on fears that looming Federal Reserve (Fed) interest rate increases could curb energy demand in the world’’s top consumer.

A stronger US dollar can hurt global demand for oil by making it more expensive in other countries. Investors were also discouraged by still high inflation in Europe and uneven economic data in China, the world’s biggest crude importer.

Brent futures for June delivery fell US$1.65, or 2.0%, to settle at US$83.12 (RM368.80) a barrel. West Texas Intermediate crude (WTI) for May delivery fell US$1.70, or 2.1%, to settle at US$79.16 (RM3351.23), while the June WTI contract, which becomes the US front-month at the end of trading on Thursday, also lost 2.1% to settle at US$79.24.

Those were the lowest closes for both benchmarks since March 31, erasing most of the price gains since the surprise oil output cut announced on April 2 by the Organization of the Petroleum Exporting Countries, Russia and other allies in the Opec+ group.

“The crude benchmarks are posting … lows … in response to a strengthening in the US dollar that is, in turn, weighing on risky assets following some hot inflation data out of Europe,” analysts at energy consulting firm Ritterbusch and Associates told customers in a note.

“We still believe that the market has been too focused on the supply side of the global oil equation following the Opec output cuts and that world oil demand is significantly weaker than widely perceived,” the note said.

US crude stockpiles fell by a bigger-than-expected 4.6 million barrels last week as refinery runs and exports rose, while petrol inventories jumped unexpectedly on disappointing demand, according to the US Energy Information Administration.

That was far more than analyst forecasts for a 1.1 million-barrel crude decline, and the American Petroleum Institute’s estimates late Tuesday of a 2.7 million-barrel draw.

Adding more pressure on oil benchmarks, Asian refiners have continued to snap up Russian crude in April. India and China have bought the vast majority of Russian oil so far in April at prices above the Western price cap of US$60 a barrel, according to traders and Reuters calculations.

Oil loadings from Russia’s western ports in April will rise to the highest since 2019, above 2.4 million barrels per day, despite Moscow’s pledge to cut output, trading and shipping sources said. – Reuters