By Rowena Edwards
LONDON (Reuters) – Oil prices fell on Wednesday on a stronger U.S. dollar and as weak data from top oil importer China raised demand fears.
Brent crude futures for August delivery were down $1.29, or 1.75%, to $72.42 a barrel at 1013 GMT. U.S. West Texas Intermediate crude (WTI) fell $1.28, or 1.84%, to $68.18.
Both benchmarks fell by more than 4% on Tuesday.
Brent’s July contract, which expires on Wednesday, and the U.S. benchmark were on track for monthly declines of more than 9% and 11%, respectively.
China’s manufacturing activity contracted faster than expected in May on weakening demand, with the official manufacturing purchasing managers’ index (PMI) down to 48.8 from 49.2 in April. The outcome lagged a forecast of 49.4.
Further pressure came as the U.S. dollar rose to its highest in over two months, making commodities more expensive for buyers holding other currencies and weighing on oil demand.
The U.S. dollar index, which measures the greenback against six major peers, saw support from cooling European inflation and progress on the U.S. debt ceiling standoff, which will advance to the House of Representatives for debate on Wednesday.
The dollar could add to recent gains if Friday’s U.S. May non-farm payrolls number is stronger than expected and raises the probability of the Federal Reserve raising rates again in June.
Market players are preparing for the upcoming June 4 meeting of OPEC+ – the Organization of the Petroleum Exporting Countries and allies including Russia.
Mixed signals by major OPEC+ producers on whether or not the group will decide to further cut oil production have sparked recent volatility in oil prices.
Despite the latest pullback in prices, the outlook for oil market fundamentals remains tight, said PVM oil market analyst Stephen Brennock.
“The most likely action is inaction,” Brennock said, regarding the OPEC+ decision.
Separately, U.S. crude oil and gasoline stockpiles were seen falling last week, while distillate inventories likely increased, a preliminary Reuters poll showed on Tuesday. [EIA/S]
The poll was conducted ahead of reports from the American Petroleum Institute, an industry group, due at 4:30 p.m. EDT (2030 GMT) on Wednesday.
(Reporting by Rowena Edwards in London; Additional reporting by Trixie Yap in Singapore, Stephanie Kelly in New York, and Yuka Obayashi in Tokyo; Editing by Mark Potter)
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Source: The Print