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Oil fumbles on global economic worries, dollar strength
[NEW YORK] Oil prices slipped on Tuesday, falling from two-month highs as concerns over a global economic slowdown crept back into the market, and a stronger dollar also weighed.
Prices sagged after a survey showed euro zone business expansion nearly stalled in January. That, coupled with disappointing US factory orders data a day earlier, stoked worries about softer demand, analysts said.
Brent crude futures fell 53 cents to settle at US$61.98 a barrel. They touched their highest level in more than two months at US$63.63 the previous day. US crude futures dropped 90 cents to settle at US$53.66 a barrel, or down 1.7 per cent.
Futures held lower after the close, when the American Petroleum Institute said US crude stocks rose by 2.5 million barrels last week, more than analyst expectations.
Oil also felt pressure from a strengthening dollar, which rallied for a fourth straight session, which makes crude more expensive for non-US buyers.
"It really seemed to be a dollar influence here today," said John Kilduff, a partner at Again Capital Management. "It was interesting that we didn't catch a bid along with the stock market because that had been the correlation."
Investors were shifting assets into equities and away from markets more sensitive to Washington-Beijing trade relations and movements in the dollar, said Phillip Streible, senior commodities strategist at RJO Futures.
"Oil is just not in favour today, and they are going after the equity markets," he said. Wall Street was slightly higher on Tuesday.
US sanctions on Venezuela have been viewed as supportive of prices by helping tighten global supplies. Numerous tankers are currently in the water off the Venezuelan coast, unable to move because state-owned PDVSA is demanding payment, which would run afoul of US sanctions.
The Organization of the Petroleum Exporting Countries and its allies, including Russia, agreed to production cuts effective from last month to beat back supply growth.
A Reuters survey found that supply from Opec states had fallen the most in two years.
Concerns about the pace of global economic growth were fanned by a weak start for the year for euro zone businesses. A Tuesday survey showed demand declined for the first in over four years.
New orders for US-made goods fell unexpectedly in November, according to data released a day earlier.