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Oil prices little changed as dollar gains, China demand weak
[NEW YORK] Oil prices were little changed on Tuesday as the US dollar climbed and signs of weaker petroleum demand in China weighed the market down for a second day.
Benchmark Brent crude was up 8 cents a barrel at US$50.81 by 2.13pm EDT (1713 GMT), after retreating to US$50.02 earlier. US light crude was down 5 cents at US$47.54, having earlier hit a low of US$47.02, the lowest in three weeks.
The dollar rose to its highest in nearly three weeks against a basket of major currencies, pressuring crude prices. A stronger dollar makes oil more expensive for buyers using other currencies. Some investors turned to oil and gold as safe haven investments last week as tensions rose between the United States and North Korea.
Chinese oil refineries operated in July at their slowest daily rates since September, official data showed. The drop was steeper than expected, raising concerns over the state of Chinese demand and the level of domestic stocks. "
People are taking a hard look at what the balance is," said John Kilduff, a partner at Again Capital LLC. "We had seen in the past few weeks that demand growth was robust, and this turned that on its head."
Ample supply from big oil exporters, including members of the Organization of the Petroleum Exporting Countries and the United States, also encouraged investors to sell long positions bought in July during a period of rising prices, analysts said.
Brent and US crude reached two-month highs in early August but have slid over the last few days, dropping more than 2.5 per cent on Monday.
The American Petroleum Institute will issue its weekly US oil inventory data at 4.30pm EDT (2030 GMT), ahead of the US government's official report on Wednesday.
Analysts polled by Reuters forecast that data would show US crude stockpiles fell for a seventh consecutive week, along with a probable drop in distillate and petrol inventories. "The focus remains on Opec, US inventories and disappointing China demand," said Hans van Cleef, senior energy economist at Dutch bank ABN Amro in Amsterdam. "Those concerns have triggered profit-taking after a strong run-up in July."
Efforts by Opec and other producers to limit output have helped lift Brent past US$50 a barrel, but production elsewhere, particularly in the United States, has pressured prices.
If US crude falls below US$47.00 a barrel and Brent crude breaks below US50.00 a barrel, prices could test lows from June, Mr Kilduff said. "We're on the precipice of a large sell-off," he said.