Oil prices fell about 2% to a two-week low on Wednesday despite a sharp drop in U.S. crude inventories as the dollar strengthened ahead of upcoming Federal Reserve (Fed) rate hikes.
A stronger US dollar could hurt global demand for oil by making it more expensive outside the US.
Investors were also daunted by still high inflation in Europe and mixed economic data from China, the world’s largest importer of crude oil.
Brent futures for June delivery fell $1.65, or 1.95%, to $83.12 a barrel. West Texas Intermediate (WTI) crude for May delivery fell $1.70, or 2.1%, to $79.16.
They were the lowest closings for both contracts since March 31, erasing most of the price increases from the surprise oil production cut announced on April 2 by the Organization of the Petroleum Exporting Countries, Russia, and other allies of the OPEC+ group.
“Benchmark crude oil contracts are hitting lows in response to a strengthening U.S. dollar which, in turn, is weighing on risky assets following some inflation data in Europe,” the firm’s analysts said in a note. energy consulting firm Ritterbusch and Associates.
“We continue to believe that the market has become too focused on the supply side of the global oil equation following OPEC production cuts and that global oil demand is significantly weaker than perceived,” the company said. society.
According to the US Energy Information Administration (EIA), crude inventories fell by 4.6 million barrels last week, more than expected, due to increased refining and exports, while gasoline inventories unexpectedly increased due to disappointing demand.
Economic activity in the US has changed little in recent weeks, as job growth moderated slightly and price increases appeared to slow, according to a Fed report.