Oil prices fell on Tuesday, after making gains for two sessions, in light of uncertainty related to the global economic outlook and the strengthening of the dollar, which conflicted with investor optimism about rising demand in China and expectations of a decrease in US crude stocks.
The dollar rose as concerns about corporate earnings and the global economic outlook grew. The rise of the dollar makes oil more expensive for buyers holding other currencies, and may reflect the decline in investors’ appetite for risk. “The recovery of the dollar has an impact on sentiment,” said Stephen Brennock of oil brokerage PVM. “I think the upcoming macro releases of US house prices and the consumer confidence index keep buyers worried as well.”
Brent crude futures fell by $1, or 1.2 percent, to $81.73 a barrel, and US West Texas Intermediate crude fell 77 cents to $77.99 a barrel. Both crude futures rose more than 1 percent on Monday.
“The general level of risk appetite has softened increasingly again today, given the losses seen in most commodity markets,” said Ole Hansen, commodities strategist at Saxo Bank.
Voluntary and involuntary supply cuts also helped support oil’s rally. And there were some tangible signs of an imminent resumption of oil exports in northern Iraq after stopping for a month. Members of the OPEC+ oil-producing group are due to start voluntary cuts in May.
But investors remain concerned about the possibility that central banks in the United States, Britain and the European Union will raise interest rates to curb inflation, which could slow economic growth and hurt energy demand.
The Federal Reserve (the US central bank), the Bank of England (the central bank) and the European Central Bank are expected to raise interest rates at their monetary policy committee meetings during the first week of May.
