Oil prices fell more than 1 per cent on Wednesday, pressured by a strengthening dollar and crude storage builds that offset support from U.S. production cuts caused by Hurricane Ian.
Brent crude futures fell $1.02, or 1.2 per cent, to $85.25 per barrel by 0630 GMT, while U.S. West Texas Intermediate (WTI) crude futures were down 97 cents, or 1.2 per cent, at $77.53 per barrel. Both contracts had risen over 2 per cent in the previous session.
The dollar hit a fresh two-decade peak against a basket of currencies on Wednesday as rising global interest rates fed recession concerns. A strong dollar reduces demand for oil by making it more expensive for buyers using other currencies.
Asian share markets sank as surging borrowing costs stoked fears of a global recession, spooking investors into the safe-haven dollar.
“With Asian markets tanking due to the surge in bond yields, demand outlooks are darkened amid a possible nearing economic recession,” said Tina Teng, an analyst at CMC Markets.
“Traders’ focus is not on the supply issues right now as the bond market’s turmoil sunk risk assets, along with a stubbornly high U.S. dollar, which pressured oil prices,” Teng added.
U.S. crude oil stocks rose by about 4.2 million barrels for the week ended Sept. 23, while gasoline inventories fell about 1 million barrels, according to market sources on Tuesday, citing figures from industry group the American Petroleum Institute.
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Distillate stocks rose by about 438,000 barrels, according to the sources, who spoke on condition of anonymity.
The report comes ahead of official Energy Information Administration data due on Wednesday at 4:30 p.m. EDT.
Goldman Sachs cut its 2023 oil price forecast on Tuesday, due to expectations of weaker demand and a stronger U.S. dollar, but said global supply disappointments only reinforced its long-term bullish outlook.
Producers began returning workers to offshore oil platforms after shutting in output ahead of Hurricane Ian, which entered the U.S. Gulf of Mexico on Tuesday and is forecast to become a dangerous Category 4 storm over the warm waters of the Gulf.
About 190,000 barrels per day of oil production, or 11 per cent of the Gulf’s total were shut-in, according to offshore regulator the Bureau of Safety and Environmental Enforcement (BSEE).
Producers lost 184 million cubic feet of natural gas or nearly 9 per cent of daily output. Personnel were evacuated from 14 production platforms and rigs, the BSEE said.
Ian is the first hurricane this year to disrupt oil and gas production in the U.S. Gulf of Mexico, which produces about 15 per cent of the United States crude oil and 5 per cent of its dry natural gas.