Oil losses eased by supply concerns, despite strong dollar

Singapore — Oil futures fell early on Thursday as the dollar firmed on the Federal Reserve’s (Fed) hawkish stance, but concerns over looming supply risks kept a floor under prices.

Brent crude shed 44c, or 0.5%, to $95.72 a barrel at 1.46am GMT, while US West Texas Intermediate (WTI) crude futures retreated 59c, or 0.7%, to $89.41.

The benchmarks settled up more than $1 on Wednesday, aided by another drop in US oil inventories, even as the Fed boosted interest rates by 75 basis points (bps) and chair Jerome Powell said it was premature to think about pausing rate increases.

A strong dollar is dragging down oil, with some market participants also likely booking profits after recent gains, CMC Markets analyst Tina Teng said.

“With the Fed confirming a higher peak in rates, a darkened global economic outlook could continue to pressure the oil futures markets,” Teng added.

But global supply risks still loom large.

The EU’s embargo on Russian oil for its invasion of Ukraine is set to start on December 5 and will be followed by a halt on oil product imports in February.

Also likely to keep supply tight in coming months, Opec producers may struggle to hit previously set output quotas, ANZ analysts said in a note.

Output from the Organization of the Petroleum Exporting Countries (Opec) fell in October for the first time since June.

On the demand side, any indication of a reopening in China after Covid-19 restrictions could be a “monster pivot”, said Stephen Innes, managing partner of SPI Asset Management. 

Reuters