Brent falls after US dollar hits two-week high

The front-month ICE Brent contract lost $1.53/bbl on the day, to trade at $83.39/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures found limited support after the American Petroleum Institute (API) reported a massive drop in US crude stocks, easing some demand growth worries in the world’s largest crude oil consuming nation.

Commercial US inventories declined by a massive 6.49 million bbls in the week ended 24 May, according to API estimates, while market analysts expected a decline of 1.9 million bbls in the week.

Renewed geopolitical risk factors also lent some support to oil prices. Israel claimed on Wednesday that it had secured control of around 14.5km of corridor that runs along the Gaza-Egypt border, Reuters reported.

Oil market watchers are expected to remain on the edge as they await the outcomes of the OPEC+ meeting on Sunday. The coalition is expected to reaffirm extension of voluntary cuts " and perhaps [make] announcement of compensation cuts,” Price Futures Group’s senior market analyst Phil Flynn said.

Downward pressure:

Brent futures shed the previous day’s gains after the US dollar hit a two-week high. The dollar strengthened against other currencies due to a rise in US bond yields.

A firm dollar typically makes oil more expensive for non-dollar holders.

Besides, prices came under pressure after a Federal Reserve (Fed) survey showed US businesses grew less optimistic about the future of interest rate cuts amid rising inflation, Reuters reported.

Higher interest rates can dampen oil demand by increasing the cost of dollar-denominated commodities like oil for non-dollar holders.

By Aparupa Mazumder

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