Crude oil dipped on Thursday as concerns about supply outweighed fears about weaker demand and a strong US dollar ahead of a potentially hefty interest rate increase. The International Energy Agency predicted last week that crude oil demand growth would slow in the fourth quarter. The dollar remained near recent highs, buoyed by expectations that the Federal Reserve of the United States will continue to tighten policy.
At 0951 GMT, Brent crude was down 56 cents, or 0.6%, to $93.54 per barrel. West Texas Intermediate crude in the United States lost 44 cents, or 0.5%, to $88.04. According to Craig Erlam, “there are multiple reasons affecting the price behavior in crude oil markets right now, with economic uncertainty right up there.” Another potential headwind is a rising dollar.
Crude oil had plummeted significantly since reaching near-all-time highs in March when Russia’s invasion of Ukraine exacerbated supply fears, which were exacerbated by the threat of a recession and decreased demand. New battles between Armenia and Azerbaijan, major Crude oil producers tied to a decades-old conflict between the ex-Soviet governments, posed a new threat to supply; however, a senior Armenian official stated on Wednesday that a truce had been reached.
While breaking above the $100 barrier is not yet certain, it appears that a bottom at approximately $90 has been reached based on Brent, owing mostly to supply concerns related to the war, according to Tamas Varga of crude oil broker PVM. Crude oil was under pressure from a strong dollar, which makes dollar-denominated commodities more costly for holders of other currencies, ahead of a Federal Reserve meeting next week, which could result in a 100 basis point rise in interest rates.
US petroleum stockpiles grew by 2.4 million barrels more than projected, according to statistics released on Wednesday, buoyed once again by continuous withdrawals from the Strategic Petroleum Reserve, part of a program set to finish next month.
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