Oil prices ease on strong dollar, mixed global economic news
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[June 22, 2024] By
Scott DiSavino
(Reuters) -Crude prices eased about 1% on Friday on worries that global
oil demand growth could be hit by a strong U.S. dollar and negative
economic news from some parts of the world.
Prices declined despite signs of improving U.S. oil demand and falling
fuel inventories that helped boost crude prices to a seven-week high a
day earlier.
Brent futures fell 47 cents, or 0.6%, to settle at $85.24 a barrel,
while U.S. West Texas Intermediate crude (WTI) ended 56 cents, or 0.7%,
lower at $80.73.
The decline pushed WTI out of technically overbought territory for the
first time in four days, while Brent futures remained overbought for a
fourth day in a row for the first time since early April.
For the week, both crude benchmarks were up about 3% after gaining about
4% last week.
The U.S. dollar rose to a seven-week high versus a basket of other
currencies with the Federal Reserve's patient approach to cutting
interest rates contrasting with more dovish stances elsewhere.
The Fed hiked interest rates aggressively in 2022 and 2023 to tame a
surge in inflation. The higher rates boosted borrowing costs for
consumers and businesses, which can slow economic growth and reduce
demand for oil.
A stronger U.S. dollar can also reduce demand for oil by making
greenback-denominated commodities like oil more expensive for holders of
other currencies.
In the world's biggest oil consumer, U.S. business activity crept up to
a 26-month high in June amid a rebound in employment, but price
pressures subsided considerably, offering hope that a recent slowdown in
inflation was likely to be sustained.
U.S. existing home sales, however, fell for a third straight month in
May as record-high prices and a resurgence in mortgage rates sidelined
potential buyers.
Data from the U.S. Energy Information Administration on Thursday showed
total product supplied, a proxy for oil demand, rose by 1.9 million
barrels per day last week to 21.1 million barrels per day.
Despite the decline in crude prices, U.S. gasoline futures climbed for a
fourth day to a one-month high on rising demand during the summer
driving season and a drop in inventories.
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The Bryan Mound Strategic Petroleum Reserve, an oil storage
facility, is seen in this aerial photograph over Freeport, Texas,
U.S., April 27, 2020. REUTERS/Adrees Latif/File Photo
MIXED GLOBAL DEMAND SIGNALS
In India, refiners processed nearly 1.3% more crude oil in May than
a year earlier, provisional government data showed, while the share
of Russian supplies in imports to India, the world's third biggest
oil consumer, increased.
"Signs of stronger demand in Asia also boosted sentiment. Oil
refineries across the region are bringing back some idled capacity
after maintenance," analysts at ANZ Research said.
But in the euro zone, business growth slowed sharply this month as
demand fell for the first time since February.
In China, the world's second biggest oil consumer, Beijing warned
that escalating frictions with the European Union over electric
vehicle imports could trigger a trade war.
Geopolitical tensions added to the mixed picture.
Ukraine's military said its drones struck four oil refineries, radar
stations and other military objects in Russia.
The head of Lebanon's Hezbollah this week pledged a full-on conflict
with Israel in the event of a cross-border war and also threatened
EU member Cyprus for the first time.
In Ecuador, state oil company Petroecuador has declared force
majeure over deliveries of Napo heavy crude for exports following
the shutdown of a key pipeline and oil wells due to heavy rains.
(Reporting by Scott DiSavino in New York, Noah Browning and Deep
Kaushik Vakil in London; additional reporting by Laila Kearney in
New York and Sudarshan Varadhan in Singapore; editing by Christian
Schmollinger, Jason Neely, Christina Fincher, Louise Heavens, Leslie
Adler and Marguerita Choy)
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