Oil falls 4% to its lowest levels since July due to concerns about demand and the strength of the dollar

Pump cranes work in front of a drilling rig at an oil field in Midland, Texas, on August 22, 2018. REUTERS/Nick Oxford/File image obtained by license

BENGALURU (Reuters) – Oil prices fell more than four percent on Tuesday, hitting their lowest levels since late July, as mixed Chinese economic data and rising OPEC exports eased concerns about tight markets and as the dollar rose.

Brent crude futures closed below $84 a barrel for the first time since the Islamic Resistance Movement (Hamas) attack on Israel on October 7. The settlement price was set at $81.61 per barrel, down $3.57, or 4.2%, while the settlement price for US West Texas Intermediate crude futures was set at $77.37 per barrel, down $3.45, or 4.3%.

“Traders will remain on high alert for signs of a broader conflict in the region that could disrupt supplies, but these concerns appear to be easing,” OANDA analyst Craig Erlam said.

Giovanni Stanovo, an analyst at UBS Bank, said that the recovery in oil exports from the Organization of the Petroleum Exporting Countries also increased pressure on oil prices.

“OPEC crude exports have risen by about one million barrels per day since their lowest levels in August as a result of seasonally lower domestic demand in the Middle East. These supplies appear to be too large for oil-consuming countries to absorb.” Stonovo said.

The premium for first-month Brent crude contracts over those loaded in six months reached its lowest level in two-and-a-half months, indicating easing concern about supply shortfalls.

On the demand side, China’s crude oil imports in October showed strong growth, but its total exports of goods and services contracted faster than expected.

“The data indicates a continued decline in China’s economic outlook due to deteriorating demand in the country’s largest export destination: the West,” City Index analyst Fiona Cincotta said.

Market sources said, citing figures from the American Petroleum Institute, that US crude oil inventories rose by about 12 million barrels last week. Oil prices extended their losses slightly in post-settlement trading, with Brent crude futures falling to $81.51 by 5:02 PM ET.

The US Energy Information Administration now expects the country’s total oil consumption to decline by 300,000 barrels per day this year, reversing its previous forecast of an increase of 100,000 barrels per day.

Fading investors’ hopes that global interest rates will peak has also helped lift the US dollar from recent lows, making oil more expensive for holders of other currencies.

Minneapolis Federal Reserve Bank President Neel Kashkari said the US central bank may have to do more to bring inflation down to its 2% target. Investors are awaiting comments from Federal Reserve Chairman Jerome Powell, scheduled for Wednesday and Thursday.

“There are concerns in oil markets about rising supply and falling demand,” Mizuho analyst Robert Jawger said. “It’s definitely not a tight market right now,” he added.

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