Oil slides as dollar strengthens
Singapore/Washington — Oil prices slipped 1% in early Asian trade on Tuesday, after falling to a three-week low in the previous session, on a stronger US dollar, rising US bond yields and mixed supply signals.
Brent futures for December delivery declined 92c, or 1.01%, to $89.79 a barrel by 2.25am GMT.
US West Texas Intermediate crude (WTI), fell 92c, or 1.04%, to $87.90 per barrel.
“Brent crude oil prices slid to around $90 a barrel as rising US yields and a stronger US dollar dominated market sentiment,” ANZ analysts said in a client note. “While supply remains tight, higher interest rates means expensive storage of inventories. This could lead to further destocking of oil inventories while increasing spot availability.”
Earlier on Monday, the US dollar rose to a 10-month high against a basket of peers after the US government avoided a partial shutdown and economic data fuelled expectations the Federal Reserve will keep rates higher for longer, which could slow economic growth.
Higher interest rates along with a stronger dollar also makes oil more expensive for holders of other currencies, which could dent oil demand.
The announcement from Turkey’s energy minister that the country will restart operations this week on a pipeline from Iraq that has been suspended for about six months further weighed on prices.
“In theory, under the terms of the Opec+ deal, production (outside the Gulf Cooperation Council) should remain flat over Q4. However, Iraq’s compliance has been somewhat spotty in the past and export levels should be expected to rise, assuming the pipeline resumes operations as planned,” analysts from BMI Research said in a client report.
Oil cartel Opec+ is expected to keep its output settings unchanged when it meets on Wednesday, keeping supplies tight.
BMI Research analysts said “given that the global economy is slowing, the group is likely to want to maintain their current cuts, while signposting the scope for further reductions, if market conditions demand it”.
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