Oil Prices See Dip With Rising Dollar
Dollar Rises, Oil Takes a Dip
U.S. crude oil prices fell to a three-week low Tuesday as the dollar strengthened and concerns about ample global supplies persisted.
U.S. crude for July delivery settled down 39 cents, or 0.8%, to $48.49 a barrel on the New York Mercantile Exchange, the lowest settlement since May 23. Brent, the global benchmark, fell 52 cents, or 1%, to $49.83 a barrel on ICE Futures Europe, the lowest level since June 3.
Prices have rallied sharply in recent weeks as natural disasters and violence cut production in some regions and U.S. output declined.
The growing possibility that the U.K. might leave the European Union has rattled global markets this week, weighing on riskier assets such as commodities, and boosting safe-haven investments like the dollar. The WSJ Dollar Index recently traded up 0.5%. A stronger dollar can make oil, which is priced in dollars, more expensive for foreign buyers.
“An exit of Britain from the EU would theoretically weaken the pound while boosting the U.S. dollar…placing further downside pressure on oil values,” said energy-advisory firm Ritterbusch & Associates in a note.
In the U.S., the rally in oil prices from less than $30 a barrel in February to more than $50 a barrel last week could encourage producers to invest in new drilling, analysts say. The number of rigs drilling for oil in the U.S. has risen for two straight weeks, according to Baker Hughes Inc.
“Expectations of U.S. production revival at $50 [are] weighing on sentiment,” said consulting firm Energy Aspects in a note.
The Energy Information Administration is due to release its latest U.S. production data Wednesday along with closely watched inventory data.
Analysts expect the agency to report that U.S. crude stockpiles fell by 2.1 million barrels last week, while gasoline supplies fell by 200,000 barrels and stocks of distillates, including diesel fuel and heating oil, were unchanged.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for that week showed a 1.2-million-barrel increase in crude supplies, a 2.3-million-barrel increase in gasoline stocks and a 3.7-million-barrel increase in distillate inventories, according to market participants.