Opposing forces of strong dollar and growing stockpiles keep oil prices steady

London — Oil prices were broadly stable on Wednesday as pressure from a strengthening dollar and crude storage builds was offset by US production cuts caused by Hurricane Ian.

Brent crude futures were up 5c, or 0.06%, at $86.32 per barrel by 9.37am GMT, while US West Texas Intermediate (WTI) crude futures were down 9c, or 0.1%, at $78.41 per barrel. Both contracts erased earlier falls after rising more than 2% in the previous session.

In the Gulf of Mexico, about 190,000 barrels per day of oil production, or 11% of the Gulf's total, were shut-in due to Hurricane Ian, according to offshore regulator the Bureau of Safety and Environmental Enforcement (BSEE).

But the dollar hit a new two-decade peak against a basket of currencies on Wednesday as rising global interest rates fed recession concerns. A strong dollar reduces demand for oil by making it more expensive for buyers using other currencies.

US crude oil stocks rose about 4.2-million barrels for the week ended September 23, while petrol inventories fell about 1-million barrels, according to market sources on Tuesday, citing figures from industry group the American Petroleum Institute.

Distillate stocks rose by about 438,000 barrels, according to the sources. The report came ahead of official Energy Information Administration data due at 2.30pm GMT.

Goldman Sachs cut its 2023 oil price forecast on Tuesday, due to expectations of weaker demand and a stronger dollar, but said global supply disappointments only reinforced its long-term bullish outlook.

An upcoming price catalyst will be producer group Opec+’s October 5 meeting at which Russia is likely to propose an output cut of about 1-million barrels per day, a source familiar with the Russian viewpoint said on Tuesday. 

Reuters