Oil prices have continued to decline due to concerns over low demand and a stronger dollar even though escalating geopolitical tensions limited the losses.
The front-month March contract for Brent crude dipped 14 cents, or 0.1%, to $79.41 a barrel as at 0333 GMT. U.S. West Texas Intermediate crude ticked down 11 cents, or 0.2%, to $74.26 a barrel.
According to market sources citing American Petroleum Institute figures on Tuesday, U.S. crude stocks fell by 6.67 million barrels in the week ended January 19.
However, gasoline stockpiles rose by 7.2 million barrels, raising worries about fuel consumption in the largest oil-consuming nation in the world.
The Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, will release the data later on Wednesday.
A stronger U.S. dollar also weighed on oil prices as demand from buyers in other currencies ebbs as they have to pay more for dollar-denominated oil.
Wednesday saw the dollar index close to a six-week high compared to key peers as investors solidified their expectations that the Federal Reserve would take its time lowering interest rates given the strength of the American economy.
“Without current geopolitical tensions, we believe crude would sell off meaningfully. Over time, we expect supply risk premiums to decouple from conflict risk, analogous to Russia-Ukraine,” said Vikas Dwivedi, global energy strategist at Macquarie, in a note.
“Barring escalation in the Middle East, we expect crude price to stay in the current range for 1Q24. We do not anticipate supply loss,” said Dwivedi.
A coalition of 24 nations led by the U.S. and UK conducted new strikes against Houthi fighters in Yemen on Tuesday.
The strikes were aimed at stopping the Houthis’ attacks on global trade, Britain said in a joint statement.
The U.S. said Iran-backed Houthis have mounted 26 attacks since late November on commercial shipping in the Red Sea, a shipping lane used by about 12% of global oil trade before the attacks.
The U.S. also carried out strike against Iran-linked militia in Iraq on Tuesday, following an attack on an Iraqi air base that wounded U.S. forces.
On the supply side, Libya’s 300,000 bpd Sharara oilfield restarted on January 21 after a protest-related pause since early January.
Elsewhere, U.S.’s third-largest oil-producing state of North Dakota brought some oil output back online after weather-related disruption, the state’s pipeline authority said. But output was still down as much as 300,000 barrels per day (bpd). In mid-January, output had weakened by as much as 425,000 bpd on extreme cold.
Follow us on:
