Picture: 123RF/PIX NOO
Picture: 123RF/PIX NOO

Singapore — Crude oil prices fell on Thursday as the US dollar strengthened after the US Federal Reserve signalled it might raise interest rates faster than expected, but losses were limited by a big drop in US crude oil inventories.

Brent crude oil futures dropped by 41 US cents, or 0.6%, to $73.98 a barrel by 4.00am GMT after reaching its highest level since April 2019 in the previous session.

US crude oil futures fell by 39c, or 0.5%, to $71.76 a barrel, after reaching its highest level since October 2018 the previous day.

“Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at Oanda.

“The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound, which should be a headwind for all commodities.”

The US dollar boasted its strongest single-day gain in 15 months after the Federal Reserve signalled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.

Still, oil price losses were limited as data from the Energy Information Administration showed that US crude oil stockpiles in the world’s biggest consumer dropped sharply last week as refineries boosted operations to their highest level since January 2020, signalling continued improvement in demand.

Also boosting prices, refinery throughput in China, the world’s second-largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.

“This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said. 

Reuters

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