Oil prices experienced a decline on Tuesday, with Brent crude oil dropping by 41 cents or 0.48% to $85.77 per barrel at 2:00 pm Nigerian time, while the US West Texas Intermediate crude fell by 40 cents or 0.5% to $80.06.
The decline in prices was attributed to a stronger US dollar and weak oil data from China, which shifted momentum after five days of gains.
The U.S. dollar rose ahead of Federal Reserve Chair Jeremy Powell’s testimony to Congress, which is focused on whether the Fed is on the right path to keep inflation on a steady decline towards its 2% target.
A stronger dollar typically reduces demand for dollar-denominated oil from buyers paying with other currencies.
Further pressure came from a contraction in China’s exports and imports in January and February, including crude oil imports, despite a lifting of COVID-19 restrictions, pointing to weakness in foreign demand.
Iris Pang, ING’s chief economist for Greater China, noted that “Given the high inflation in the U.S. and Europe, demand from there should keep weakening, which also dampens processing demand in China.”
Despite the declines, supply concerns limited the dip. Chevron (CVX.N) Chief Executive Mike Wirth recently commented that there is “not a lot of swing capacity,” making the global market vulnerable to any unexpected supply disruption. Additionally, U.S. crude inventories could see their first decrease in 10 weeks, as per a Reuters poll before official data is published this week.
Oil prices can be unpredictable, and it is important to stay up-to-date with market trends and fluctuations. The American Petroleum Institute’s weekly report is due at 2130 GMT on Tuesday, followed by Energy Information Administration data at 1530 GMT on Wednesday.
While there are supply concerns, it remains to be seen whether oil prices will continue their downward trend amidst stronger economic factors.