Strong dollar weakens oil demand, prices retreat

20 Mar 2024 , 09:26 AM

Early on Wednesday in Asian trading, oil prices began to decline as traders withdrew some of their capital following two sessions in which benchmarks surged to multi-month highs, dampening investor demand due to a stronger dollar.

May delivery of Brent oil futures dropped 19 cents, or 0.2%, to $87.19 per barrel. The April delivery of U.S. West Texas Intermediate futures, which settle on Wednesday, saw a drop of 35 cents, or 0.4%, to $83.12 per barrel.

The U.S. dollar index increased for the sixth straight session, weighing on Asian buyer confidence as recent statistics indicated a robust U.S. economy. Demand is stifled when oil becomes more costly for investors holding other currencies due to a rising dollar.

In the previous session, when market players evaluated the impact on oil and petroleum supply from Ukrainian drone attacks on Russian facilities, both Brent and WTI settled at their highest levels since late October.

Trade sources told Reuters on Tuesday that Russia’s crude oil exports had increased due to a reduction in the country’s refining capacity caused by the strikes. According to them, oil shipments from Russia’s western ports would reach 2.22 million barrels per day in March, up about 260,000 barrels per day over the first monthly plan.

According to reports cited by the American Petroleum Institute, distillate inventories increased last week while crude oil and gasoline stockpiles in the country decreased. Experts surveyed by Reuters predicted that last week’s gains in inventories would be roughly 10,000 barrels.

The U.S. Energy Information Administration is expected to release official stockpile numbers on Wednesday at 1430 GMT.

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